Which of the Following Statements Is False

question 16

Multiple Choice

Which of the following statements is false?

• A) The levered equity return equals the unlevered return, plus an extra "kick" due to leverage.
• B) By holding a portfolio of the firm's equity and its debt, we can replicate the cash flows from holding its levered equity.
• C) The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.
• D) If a firm is unlevered, all of the free cash flows generated by its assets are available to be paid out to its equity holders.

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Definitions:

Terminate Services

The process of ending the professional relationship or services provided to a client, typically when goals have been met or under circumstances requiring discontinuation.

Desired Goals

Objectives or outcomes that an individual or group aims to achieve, based on personal values, aspirations, or professional targets.

Treatment Process

The structured method or course of actions designed to address and manage a health condition, including diagnosis, intervention, and monitoring.

Maintenance Strategy

A plan for managing and conducting regular upkeep to ensure the optimal functioning and prolong the lifespan of assets or systems.