Which of the Following Statements Is False

question 45

Multiple Choice

Which of the following statements is false?

• A) In perfect capital markets, buying and selling securities is a zero-NPV transaction, so it should not affect firm value.
• B) Making positive-NPV investments will create value for the firm's investors, whereas saving the cash or paying it out will not.
• C) In perfect capital markets, if a firm invests excess cash flows in financial securities, the firm's choice of payout versus retention is irrelevant and does not affect the initial share price.
• D) After adjusting for investor taxes, there remains a substantial tax advantage for the firm to retain excess cash.

---

Definitions:

Industrial Engineering

A branch of engineering focused on optimizing complex processes, systems, or organizations by improving productivity, efficiency, and safety.

Emotional Intelligence

The capacity to recognize, understand, manage, and reason with emotions, both in oneself and in others.

Judicial Decisions

Rulings or conclusions by courts concerning laws, constitutions, or cases that serve as precedents for subsequent legal decisions.

Law of Contracts

The branch of law dealing with the creation and enforcement of agreements between parties, outlining the obligations that each party must fulfill.