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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George H.W. Bush

The 41st President of the United States, serving from 1989 to 1993, known for overseeing the end of the Cold War.

American Troops

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