Which of the Following Statements Is False

question 68

Multiple Choice

Which of the following statements is false?

• A) Given a forecast of future interest payments, we can determine the interest tax shield and compute its present value by discounting it at a rate that corresponds to its risk.
• B) The total value of the unlevered firm exceeds the value of the firm with leverage due to the present value of the tax savings from debt.
• C) To compute the increase in the firm's total value associated with the interest tax shield, we need to forecast how a firm's debt and therefore its interest payments.
• D) There is an important tax advantage to the use of debt financing.

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Definitions:

Crystal Ball

A metaphor often used to describe the attempt to predict future events or decisions.

Decision Table Tool

A visual representation tool that summarizes complex decision logic by listing possible conditions and actions or outcomes in a table format.

Crystal Ball

Software used for predictive modeling, simulation, and forecasting, often utilized in financial analysis and project management.

Scenario Analysis Tool

A software or method used in risk management to predict and evaluate future events by creating plausible and varied sets of assumptions.