Which of the Following Statements Is False

question 8

Multiple Choice

Which of the following statements is false?

• A) To determine the benefit of leverage for the value of the firm, we must compute the present value of the stream of future interest tax shields the firm will receive.
• B) Because the cash flows of the levered firm are equal to the sum of the cash flows from the unlevered firm plus the interest tax shield, by the Law of One Price the same must be true for the present values of these cash flows.
• C) By increasing the amount paid to debt holders through interest payments, the amount of the pretax cash flows that must be paid as taxes increases.
• D) When a firm uses debt, the interest tax shield provides a corporate tax benefit each year.

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Definitions:

Invoice Terms

Conditions specified on an invoice, including payment deadlines, cash discount opportunities, and penalties for late payment.

Invoice

An itemized bill showing the list of goods sold or services provided, their prices, and the total amount to be paid.

Credited

To add a sum of money to an account, or to acknowledge someone's contribution to something.

Payment

The transfer of money from one party to another in exchange for goods, services, or to fulfill a legal obligation.