Which of the Following Statements Is False

question 16

Multiple Choice

Which of the following statements is false?

• A) Once investors know the recap will occur, the share price will rise immediately to a level that reflects the value of the interest tax shield that the firm will receive from its recapitalization.
• B) When securities are fairly priced, the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage.
• C) In the presence of corporate taxes, we do not include the interest tax shield as one of the firm's assets on its market value balance sheet.
• D) We can analyze the recapitalization using the market value balance sheet; it states that the total market value of a firm's securities must equal the total market value of the firm's assets.

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Definitions:

Glomerular Filtration

Protein-free plasma forced out of glomerular capillaries by blood pressure enters Bowman’s capsule.

Plasma

Fluid portion of blood.

Blood

Circulatory fluid of a closed circulatory system. Of vertebrates, fluid connective tissue consisting of plasma and cellular components (red cells, white cells, platelets) that form in bones.

Tubular Secretion

A process in the kidneys where substances are actively transported from blood into the urine through the tubules.