Which of the Following Statements Is FALSE

question 26

Multiple Choice

Which of the following statements is FALSE?

• A)In the real world,specific projects should differ only slightly from the average investment made by the firm.
• B)We can estimate r_U for a new project by looking at single-division firms that have similar business risks.
• C)The project's equity cost of capital depends on its unlevered cost of capital,r_U,and the debt-equity ratio of the incremental financing that will be put in place to support the project.
• D)Projects may vary in the amount of leverage they will support - for example,acquisitions of real estate or capital equipment are often highly levered,whereas investments in intellectual property are not.

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Definitions:

Validly Infer

To deduce conclusions from premises using logical and sound reasoning.

Comparative Inference

The process of deducing conclusions based on the comparison of multiple instances or pieces of evidence.

Simplicity

In the evaluation of comparisons, is a measure of the relative absence of complexity.

Comparative Reasoning

A method of reasoning that involves comparing similarities and differences among objects, concepts, or situations.