Which of the Following Statements Is False

question 16

Multiple Choice

Which of the following statements is false?

• A) Once investors know the recap will occur, the share price will rise immediately to a level that reflects the value of the interest tax shield that the firm will receive from its recapitalization.
• B) When securities are fairly priced, the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage.
• C) In the presence of corporate taxes, we do not include the interest tax shield as one of the firm's assets on its market value balance sheet.
• D) We can analyze the recapitalization using the market value balance sheet; it states that the total market value of a firm's securities must equal the total market value of the firm's assets.

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Definitions:

Leningrad

The former name of Saint Petersburg, a city in Russia, during the Soviet era from 1924 to 1991.

Teratogens

Environmental agents that can cause deviations from normal development and can lead to abnormalities or death.

Prenatal Development

The process of growth and development within the womb, from conception to the birth of a child.

Cleavage

The process of cell division in a developing embryo where a single fertilized cell divides into multiple, smaller cells.