Which of the Following Statements Is FALSE

question 66

Multiple Choice

Which of the following statements is FALSE?

• A)Leverage decreases the risk of the equity of a firm.
• B)Because the cash flows of the debt and equity sum to the cash flows of the project,by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project.
• C)Franco Modigliani and Merton Miller argued that with perfect capital markets,the total value of a firm should not depend on its capital structure.
• D)It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity.

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Definitions:

Explanandum

This is the phenomenon or event that needs to be explained in scientific or philosophical inquiry.

Explanation

The act of making something clear or understandable by describing the relevant facts or ideas.

Sweater

A knitted garment typically with long sleeves, worn over the upper body.

Explanandum

The phenomenon or event that is being explained in a scientific theory or investigation.