Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)The levered equity return equals the unlevered return,plus an extra "kick" due to leverage.
• B)By holding a portfolio of the firm's equity and its debt,we can replicate the cash flows from holding its levered equity.
• C)The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.
• D)If a firm is unlevered,all of the free cash flows generated by its assets are available to be paid out to its equity holders.