Which of the Following Statements Is False

question 66

Multiple Choice

Which of the following statements is false?

• A) Holding cash has the opposite effect of leverage on risk and return.
• B) We use the market value of the firm's net debt when computing its WACC and unlevered beta to measure the cost of capital and market risk of the firm's business assets.
• C) Since the WACC does not change with the use of leverage, the value of the firm's free cash flow evaluated using the WACC does not change, and so the enterprise value of the firm does not depend on its financing choices.
• D) Even if the firm's capital structure is more complex, the WACC is calculated by computing the weighted average cost of only the firm's debt and equity.

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Definitions:

Reinforcement

A psychological principle involving the use of rewards or punishments to increase or decrease the likelihood of a particular behavior.

Aversive Event

An unpleasant or undesirable occurrence that can lead to changes in behavior or psychological state.

Social Learning Theory

A theory that suggests people learn new behaviors through observational learning of others' actions and consequences.

Observation and Imitation

A method of learning in which an individual observes the actions of others and mimics them, crucial in the acquisition of new behaviors.