Which of the Following Statements Is False

question 67

Multiple Choice

Which of the following statements is false?

• A) Personal taxes have the potential to offset some of the corporate tax benefits of leverage.
• B) The actual interest tax shield depends on the reduction in the total taxes (both corporate and personal) that are paid.
• C) The amount of money an investor will pay for a security ultimately depends on the benefits the investor will receive-namely, the cash flows the investor will receive before all taxes have been paid.
• D) Just like corporate taxes, personal taxes reduce the cash flows to investors and diminish firm value.

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Definitions:

OPEC Cartel

An organization of oil-producing countries that coordinates and unifies petroleum policies to secure fair and stable prices for petroleum producers.

Predatory Pricing

A competitive strategy where a firm sets very low prices with the intention of driving competitors out of the market, or to prevent new entries.

Antitrust Laws

Regulations designed to promote competition and prevent monopolies by limiting the power of large corporations.

Cartels

Groups of independent market participants who collude to control prices and output in an industry to maximize their collective profits.