Which of the Following Statements Is False

question 26

Multiple Choice

Which of the following statements is false?

• A) Leverage decreases the risk of the equity of a firm.
• B) Because the cash flows of the debt and equity sum to the cash flows of the project, by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project.
• C) Franco Modigliani and Merton Miller argued that with perfect capital markets, the total value of a firm should not depend on its capital structure.
• D) It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity.

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Definitions:

Weber Fraction

A measure in psychophysics that quantifies the perception of change in a given stimulus relative to its intensity.

Visual Discriminations

The ability to perceive and differentiate visual stimuli and fine details among similar objects or forms.

Auditory Discriminations

The ability to notice, compare, and distinguish between different sounds, integral to language development and communication.

Absolute Threshold

The minimum intensity of a stimulus that one can perceive, below which it is not detected at all.