Which of the Following Statements Is FALSE

question 70

Multiple Choice

Which of the following statements is FALSE?

• A)Rather than set debt according to a target debt-equity ratio or interest coverage level,a firm may adjust its debt according to a fixed schedule that is known in advance.
• B)When we relax the assumption of a constant debt-equity ratio,the equity cost of capital and WACC for a project will change over time as the debt-equity ratio changes.
• C)When we relax the assumption of a constant debt-equity ratio,the APV and FTE methods are difficult to implement.
• D)If a firm is using leverage to shield income from corporate taxes,then it will adjust its debt level so that its interest expenses grow with its earnings.

Analyze the effects of judiciary decisions on U.S. society and politics, especially concerning abortion rights.

Recognize the role of technology, including the internet and GPS, in shaping contemporary society and globalization.

Identify the economic policies and their implications on U.S. and global economics during this period.

Evaluate the social and cultural shifts, including the debate on sexual harassment, the rise of telecommuting, and the culture wars.

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Definitions:

Call Provision

A feature of a bond or other fixed-income security that allows the issuer to repurchase and retire the debt before its maturity date.

Par Value

The face value of a bond or stock as stated by the issuer, which is not necessarily indicative of its market value.

Maturity Date

The specific date on which the principal amount of a financial instrument is to be paid back in full.

Bond Ratings

Evaluations of the credit quality and risk of default of a bond, issued by rating agencies, influencing interest rates and investor demand.