Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Even though firms have not issued new equity, the market value of equity has risen over time as firms have grown.
• B) While firms seem to prefer debt when raising external funds, not all investment is externally funded.
• C) To receive the full tax benefits of leverage a firm needs to use 100% debt financing.
• D) If bankruptcy is costly, these costs might offset the tax advantages of debt financing.

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Definitions:

Social Security Tax

A mandatory government tax taken from workers' earnings to fund the Social Security program, which provides retirement, disability, and survivor benefits.

Medicare Tax

A federal tax deducted from an individual's wages to fund the Medicare program, which provides healthcare benefits to eligible elderly and disabled individuals.

Computer Programmer

A specialist who writes, tests, and maintains computer software or applications.

Employment Agency

A business that has lists of job openings and charges a fee to find jobs for people.