Which of the Following Statements Is False

question 16

Multiple Choice

Which of the following statements is false?

• A) The levered equity return equals the unlevered return, plus an extra "kick" due to leverage.
• B) By holding a portfolio of the firm's equity and its debt, we can replicate the cash flows from holding its levered equity.
• C) The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.
• D) If a firm is unlevered, all of the free cash flows generated by its assets are available to be paid out to its equity holders.

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Definitions:

Age Group

A classification based on the age of individuals, often used in research and demographics to segment populations.

Accident Rates

The frequency or occurrence of accidents within a specified period of time or group.

Past Three Years

The period extending from the current date back through the last three calendar years.

Probability Assignment

The process of assigning a numerical value, ranging from 0 to 1, to the likelihood of the occurrence of an event.