Which of the Following Statements Is False

question 26

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:

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A statistical measure that helps to determine the significance of results obtained in hypothesis testing, indicating the probability of observing results at least as extreme as those observed, under the assumption that the null hypothesis is true.

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A classification of individuals based on their usage of tobacco products, typically categorized into current smoker, former smoker, and never smoked.

P-value

A statistical measure that indicates the probability of the observed data under the assumption that the null hypothesis is true.

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