Which of the Following Statements Is False

question 26

Multiple Choice

Which of the following statements is false?

• A) Leverage decreases the risk of the equity of a firm.
• B) Because the cash flows of the debt and equity sum to the cash flows of the project, by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project.
• C) Franco Modigliani and Merton Miller argued that with perfect capital markets, the total value of a firm should not depend on its capital structure.
• D) It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity.

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Definitions:

Predicted

Something that has been declared or indicated as likely to happen in the future based on current data or trends.

Primary Reasons

The main or core rationale behind an action, decision, or phenomenon.

Business

An organizational entity that provides goods or services to consumers in exchange for monetary compensation.

Innovation

The introduction of new ideas, products, services, or processes, driving progress and offering competitive advantages in the business world.