Which of the Following Statements Is False

question 20

Multiple Choice

Which of the following statements is false?

• A) With no debt, the WACC is equal to the unlevered equity cost of capital.
• B) With perfect capital markets, a firm's WACC is dependent of its capital structure and is equal to its equity cost of capital only the firm it is unlevered.
• C) As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firm's WACC is unchanged.
• D) Although debt has a lower cost of capital than equity, leverage does not lower a firm's WACC.

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Definitions:

Infirmary

A place in an institution like a school or prison where medical care is provided.

Psychoanalysis

A therapeutic technique and theory of psychology developed by Sigmund Freud, emphasizing unconscious motivations and conflicts as determinants of human behavior.

Psychiatrist

A medical doctor specializing in the diagnosis, treatment, and prevention of mental, emotional, and behavioral disorders.

Hallucinations

Perceptions in a conscious and awake state in the absence of external stimuli which have qualities of real perception, often related to visual, auditory, or other sensory experiences.