Which of the Following Statements Is False

question 41

Multiple Choice

Which of the following statements is false?

• A) The firm's unlevered cost of capital is equal to its pre-tax weighted average cost of capital - that is, using the pre-tax cost of debt, r_d , rather than its after-tax cost, r_d (1 - τ_c ).
• B) A firm's levered cost of capital is a weighted average of its equity and debt costs of capital.
• C) When the firm maintains a target leverage ratio, its future interest tax shields have similar risk to the project's cash flows, so they should be discounted at the project's unlevered cost of capital.
• D) The first step in the APV method is to calculate the value of free cash flows using the project's cost of capital if it were financed without leverage.

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Definitions:

Individualistic Societies

Societies that emphasize personal achievements, individual rights, and autonomy, as opposed to collective goals.

Collectivistic Societies

Societies that prioritize the needs and goals of the group over the desires of the individual, emphasizing community, cooperation, and interdependence.

Relationship Orientations

The inclination or preference towards certain types of interactions or bonds with others, influencing personal connections.

Social Identity

An individual's sense of who they are, based on their group membership(s).