Which of the Following Statements Is FALSE

question 30

Multiple Choice

Which of the following statements is FALSE?

• A)Often,the decision to abandon a project entails costs,which may be either positive or negative.
• B)Mortgage interest rates are higher than Treasury rates because mortgages have an abandonment option that Treasuries do not have: You can prepay your mortgage at any time,while the U.S.government can repay its debt only according to the schedule outlined in the bond contract.
• C)A popular option gives holders of the bond the option to convert the bond into equity.These kinds of bonds are termed callable bonds.
• D)More often than not,there is an opportunity cost of abandoning a project: If you shut down the project and later decide to start it up again,you have to pay the costs of restarting the project.

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Definitions:

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Operating Activities

Activities related to the core business functions of a company, such as selling goods or services and managing expenses.

Stock Dividend

A payment of additional shares of stock to shareholders instead of cash.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of an entity.