Which of the Following Statements Regarding Recapitalizations Is False

question 17

Multiple Choice

Which of the following statements regarding recapitalizations is false?

• A) With a recapitalization, even though leverage reduces the total value of equity, shareholders capture the benefits of the interest tax shield up front.
• B) The share price rises after the completion of the recapitalization.
• C) Leveraged recaps were especially popular in the mid- to late-1980s, when many firms found that these transactions could reduce their tax payments.
• D) When a firm makes a significant change to its capital structure, the transaction is called a recapitalization.

---

Definitions:

Control Group

In an experiment, the group that does not receive the treatment under investigation; used as a baseline to compare effects.

Viral Infection

A disease that occurs when an organism's body is invaded by pathogenic viruses, and infectious virus particles are produced within the body.

Proportions

Refers to the fractional part of a whole, represented by the ratio of a part to the whole.

Evidence

Information or facts presented in support or against a hypothesis or claim.