Which of the Following Statements Is False

question 44

Multiple Choice

Which of the following statements is false?

• A) While debt itself may be cheap, it increases the risk and therefore the cost of capital of the firm's equity.
• B) Although debt does not have a lower cost of capital than equity, we can consider this cost in isolation.
• C) We can use Modigliani and Miller's first proposition to derive an explicit relationship between leverage and the equity cost of capital.
• D) The total market value of the firm's securities is equal to the market value of its assets, whether the firm is unlevered or levered.

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Definitions:

Marginal Social Cost

The additional cost imposed on society as a whole by an additional unit of production.

Tax Rate

The percentage at which an individual or corporation is taxed, which can be applied to income, property, sales, and other taxes.

Positive Amount

A positive amount refers to a quantity greater than zero, used in various contexts to denote a non-negative, beneficial, or additive value.

Pollution Per Day

A measure of the total amount of pollution emitted in a single day, which can be measured in terms of particulate matter, carbon emissions, or other pollutants.