Which of the Following Statements Is False

question 68

Multiple Choice

Which of the following statements is false?

• A) The Law of One Price implies that leverage will affect the total value of the firm under perfect capital market conditions.
• B) In the absence of taxes or other transaction costs, the total cash flow paid out to all of a firm's security holders is equal to the total cash flow generated by the firm's assets.
• C) With perfect capital markets, leverage merely changes the allocation of cash flows between debt and equity, without altering the total cash flows of the firm.
• D) In a perfect capital market, the total value of a firm is equal to the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure.

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Definitions:

Social Relations

Interactions between individuals and groups, including their formation, maintenance, and significance within a social context.

Irrational Thought

Cognitive processes that lack reason or logic, often influenced by emotions and false assumptions.

Emotional Numbing

A psychological condition where an individual experiences a significant reduction in the ability to feel or express emotions, often as a response to trauma or stress.

Biological Predisposition

An innate tendency or vulnerability to develop certain conditions, often based on genetic factors.