Which of the Following Statements Regarding Value Additivity Is False

question 1

Multiple Choice

Which of the following statements regarding value additivity is false?

• A) The value of a portfolio is equal to the sum of the values of its parts.
• B) The price or value of the entire firm is equal to the sum of the values of all projects and investments within the firm.
• C) To maximize the value of the entire firm, managers should make decisions that maximize NPV.
• D) Value additivity does not have important consequences for the value of the entire firm, only on portfolios of firms.

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Definitions:

American Families

A demographic or sociological term referring to household structures in the United States, which can vary widely in terms of size, composition, and roles.

Unbiased Coin

A coin for which the probability of landing on heads or tails is exactly 50%, indicating no preference or bias.

Expected Number

A statistical measure describing the average or mean value anticipated in a random variable or in the outcomes of a random experiment.

Binomially Distributed

A distribution characteristic of a random variable that represents the number of successes in a fixed number of independent Bernoulli trials, each with the same probability of success.