Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)If the debt-equity ratio changes over time,the risk of equity-and,therefore,its cost of capital-will change as well.
• B)The FTE method can offer an advantage when calculating the value of equity for the entire firm,if the firm's capital structure is complex and the market values of other securities in the firm's capital structure are not known.
• C)The FTE approach does not have the same disadvantage associated with the APV approach.We don't need to compute the project's debt capacity to determine interest and net borrowing before we can make the capital budgeting decision.
• D)The WACC and APV methods compute the firm's enterprise value,so that a separate valuation of the other components of the firm's capital structure is needed to determine the value of equity.

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Definitions:

Independent Variable

A variable that is manipulated in an experiment to observe its effect on the dependent variable.

Dependent Variable

In experimental and statistical research, the variable being tested and measured, which is expected to change as a result of variations in the independent variable.

Control Group

In experiments, it refers to the group of participants who do not receive the experimental treatment or intervention, serving as a benchmark to measure how the other tested subjects do.

The Experiment

A research method in psychology and the sciences used to determine cause-effect relationships by manipulating variables under controlled conditions.