Which of the Following Statements Is False

question 67

Multiple Choice

Which of the following statements is false?

• A) The more cash the firm uses to repurchase shares, the less it has available to pay dividends.
• B) Free cash flow measures the cash generated by the firm after payments to debt or equity holders are considered.
• C) We estimate a firm's current enterprise value by computing the present value of the firm's free cash flow.
• D) We can interpret the enterprise value as the net cost of acquiring the firm's equity, taking its cash and paying off all debts.

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Definitions:

Heuristic

A rule of thumb that suggests a course of action or guides problem solving but does not guarantee an optimal solution.

Cognitive Schema

A mental framework that helps organize and interpret information, based on past experiences and knowledge.

Cognitive Heuristic

Simple, efficient rules which people often use to form judgments and make decisions; they are mental shortcuts that reduce the cognitive load of making a decision.

Proposition

A statement or assertion that expresses a judgment or opinion.