Which of the Following Statements Is False

question 65

Multiple Choice

Which of the following statements is false?

• A) The tradeoff theory weighs the costs of debt that result from shielding cash flows from taxes against the benefits from the effects of financial distress associated with leverage.
• B) Leverage has costs as well as benefits.
• C) According to the tradeoff theory, the total value of a levered firm equals the value of the firm without leverage plus the present value of the tax savings from debt, less the present value of financial distress costs.
• D) Firms have an incentive to increase leverage to exploit the tax benefits of debt. But with too much debt, they are more likely to risk default and incur financial distress costs.

Recognize the various factors that contribute to the exercise of voice within organizations.

Identify the mum effect and its implications on communication and information flow.

Differentiate between voice, silence, and related communication processes.

Understand the role of psychological safety in facilitating or inhibiting voice.

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Definitions:

Price

The amount of money expected, required, or given in exchange for something.

Kinked Demand

A demand curve that has a distinct bend or "kink," often used to describe oligopolistic markets where firms face different elasticities for price increases versus price decreases.

Oligopolistic Competition

A market structure in which a few firms dominate. Each firm is aware of the actions of others and may engage in strategic decision making.

Cutthroat Oligopolist

describes a market condition where few firms compete intensely with aggressive pricing and strategies, often to the detriment of all involved.