Which of the Following Statements Concerning the Compressed Adjusted Present

question 5

Multiple Choice

Which of the following statements concerning the compressed adjusted present value (APV) model is NOT CORRECT?

• A) The value of a growing tax shield is greater than the value of a constant tax shield.
• B) For a given D/S, the levered cost of equity using the compressed APV model is greater than the levered cost of equity under MM's original (with tax) assumptions.
• C) For a given D/S, the WACC in the compressed APV model is less than the WACC under MM's original (with tax) assumptions.
• D) The total value of the firm increases with the amount of debt.
• E) The tax shields should be discounted at the unlevered cost of equity.

---

Definitions:

Media Violence

Representations of violent acts in media sources, such as TV, movies, video games, and the internet, which are a subject of concern regarding their potential influence on real-life aggressive behavior.

Risky Behavior

Involves actions that can potentially harm an individual or others, often characterized by the disregard for negative consequences.

Vicariously Experienced

Refers to learning or feeling something through the experiences of another person, rather than through direct personal experience.

Social Cognitive Theory

A theory in psychology that posits learning occurs in a social context with a dynamic and reciprocal interaction of the person, environment, and behavior.