Which of the Following Statements Is FALSE

question 63

Multiple Choice

Which of the following statements is FALSE?

• A)In general,the gain to investors from the tax deductibility of interest payments is referred to as the interest tax shield.
• B)The interest tax shield is the additional amount that a firm would have paid in taxes if it did not have leverage.
• C)Because Corporations pay taxes on their profits after interest payments are deducted,interest expenses reduce the amount of corporate tax firms must pay.
• D)As Modigliani and Miller made clear in their original work,capital structure matters in perfect capital markets.Thus,if capital structure does not matter,then it must stem from a market imperfection.