Which of the Following Statements Is FALSE

question 95

Multiple Choice

Which of the following statements is FALSE?

• A)Even though firms have not issued new equity,the market value of equity has risen over time as firms have grown.
• B)While firms seem to prefer debt when raising external funds,not all investment is externally funded.
• C)To receive the full tax benefits of leverage a firm needs to use 100% debt financing.
• D)If bankruptcy is costly,these costs might offset the tax advantages of debt financing.

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Definitions:

Intellectual Property

Legal rights that protect creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce.

Greenfield Operation

A greenfield operation involves a company starting a new venture from the ground up in a foreign country, rather than purchasing or partnering with an existing local company.

Subsidiary Company

A company that is owned or controlled by another company, which is referred to as the parent company.

Licensing

A business agreement in which one party allows another to use its brand, patent, or technology for a fee or royalty.