Which of the Following Statements Is False

question 13

Multiple Choice

Which of the following statements is false?

• A) As long as investors can borrow or lend at the same interest rate as the firm, homemade leverage is a perfect substitute for the use of leverage by the firm.
• B) When investors use leverage in their own portfolios to adjust the leverage choice made by the firm, we say that they are using homemade leverage.
• C) The value of the firm is determined by the present value of the cash flows from its current and future investments.
• D) The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.

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Definitions:

Retrieval Cues

Stimuli that help you recall or access memories, often by triggering an associated memory.

Emotional States

The complex feelings that result from the body's reaction to a situation, affecting mood and behavior.

Primacy Effect

Refers to the tendency to remember information at the beginning of a list better than information in the middle or at the end.

Repression

A defense mechanism where unwanted or disturbing thoughts, memories, or desires are unconsciously pushed out of conscious awareness.