Which of the Following Statements Is False

question 13

Multiple Choice

Which of the following statements is false?

• A) As long as investors can borrow or lend at the same interest rate as the firm, homemade leverage is a perfect substitute for the use of leverage by the firm.
• B) When investors use leverage in their own portfolios to adjust the leverage choice made by the firm, we say that they are using homemade leverage.
• C) The value of the firm is determined by the present value of the cash flows from its current and future investments.
• D) The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.

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Definitions:

Roulette-Type Game

A gambling game in which a ball is dropped onto a spinning wheel with numbered compartments, with players betting on where the ball will come to rest.

Charity Bazaar

Denotes a fundraising event organized to raise money for charitable causes, often featuring sales of goods and various entertainments.

Betting

Staking something on the outcome of an event in the hope of winning more than what was wagered.

Dual-Process Theory

A cognitive theory suggesting that thought can arise in two different ways, or as a result of two different processes, often described as intuitive and analytical thinking.