Which of the Following Statements Is False

question 84

Multiple Choice

Which of the following statements is false?

• A) In general, the gain to investors from the tax deductibility of interest payments is referred to as the interest tax shield.
• B) The interest tax shield is the additional amount that a firm would have paid in taxes if it did not have leverage.
• C) Because Corporations pay taxes on their profits after interest payments are deducted, interest expenses reduce the amount of corporate tax firms must pay.
• D) As Modigliani and Miller made clear in their original work, capital structure matters in perfect capital markets. Thus, if capital structure does not matter, then it must stem from a market imperfection.

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Definitions:

Equivalent Units

A concept used in cost accounting to express the amount of work done on incomplete units in terms of fully completed units.

Finished Goods Inventory

Manufactured products that are complete and ready for sale.

Cost Of Goods Sold

The total direct costs attributable to the production of the goods sold in a company, including materials and labor.

Physical Units

A measure of quantity in production or inventory, typically referred to when counting tangible products or items.