Which of the Following Statements Is False

question 82

Multiple Choice

Which of the following statements is false?

• A) If the debt-equity ratio changes over time, the risk of equity-and, therefore, its cost of capital-will change as well.
• B) The FTE method can offer an advantage when calculating the value of equity for the entire firm, if the firm's capital structure is complex and the market values of other securities in the firm's capital structure are not known.
• C) The FTE approach does not have the same disadvantage associated with the APV approach: We don't need to compute the project's debt capacity to determine interest and net borrowing before we can make the capital budgeting decision.
• D) The WACC and APV methods compute the firm's enterprise value, so that a separate valuation of the other components of the firm's capital structure is needed to determine the value of equity.

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Definitions:

Absorption

The process by which substances are taken up and assimilated into the body of an organism.

Gas Exchange

The biological process by which gases (such as oxygen and carbon dioxide) are transferred between living organisms and the environment, typically occurring in the lungs in humans and across the surfaces of leaves in plants.

Endosymbiosis

A theory explaining the origin of eukaryotic cells from prokaryotic organisms through a symbiotic relationship.

Chloroplast

A type of organelle found in plant cells and some algae, which is the site of photosynthesis and responsible for producing energy through light.