Which of the Following Statements Is FALSE

question 71

Multiple Choice

Which of the following statements is FALSE?

• A)As long as investors can borrow or lend at the same interest rate as the firm,homemade leverage is a perfect substitute for the use of leverage by the firm.
• B)When investors use leverage in their own portfolios to adjust the leverage choice made by the firm,we say that they are using homemade leverage.
• C)The value of the firm is determined by the present value of the cash flows from its current and future investments.
• D)The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.

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Definitions:

Personal Income Tax

Tax levied on individuals or households based on their income level.

Raising Children

The process and practices involved in promoting and supporting the physical, emotional, social, and intellectual development of a child from infancy to adulthood.

Opportunity Cost

The economic consequence of bypassing the nearest favorable option when making a choice.

Attractive Offer

A proposal or deal that is appealing and likely to be accepted by others.