Which of the Following Statements Is False

question 66

Multiple Choice

Which of the following statements is false?

• A) Holding cash has the opposite effect of leverage on risk and return.
• B) We use the market value of the firm's net debt when computing its WACC and unlevered beta to measure the cost of capital and market risk of the firm's business assets.
• C) Since the WACC does not change with the use of leverage, the value of the firm's free cash flow evaluated using the WACC does not change, and so the enterprise value of the firm does not depend on its financing choices.
• D) Even if the firm's capital structure is more complex, the WACC is calculated by computing the weighted average cost of only the firm's debt and equity.

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Definitions:

Net Profit Margin

A financial metric that calculates the percentage of net profits earned with respect to sales revenue, indicating the efficiency of a company in converting sales into actual profits.

Supply-Chain Efficiencies

The optimization of activities in the supply chain to minimize costs and waste while maximizing speed and quality.

Increase In Profit

The growth in net earnings resulting from operations, often driven by increased sales, cost reduction, or improved productivity.

Bullwhip Effect

A phenomenon in supply chain management where small fluctuations in demand at the retail level cause increasingly larger fluctuations in demand at the wholesale, distributor, and manufacturer levels.