Which of the Following Statements Is False

question 10

Multiple Choice

Which of the following statements is false?

• A) To determine the true tax benefit of leverage, we need to evaluate the combined effect of both corporate and personal taxes.
• B) A personal tax disadvantage for debt causes the WACC to decline more slowly with leverage than it otherwise would.
• C) Personal taxes have an indirect effect on the firm's weighted average cost of capital.
• D) In Canada and many other countries, capital gains from equity have historically been taxed more heavily than interest income.

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Definitions:

Absorption Costing

Definition: An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Inventory

Inventory refers to raw materials, work-in-process, and finished goods that are held by a company in anticipation of eventual sale.

Controllable Costs

For a level of management, the costs that can be influenced (increased, decreased, or eliminated) by management at that level.

Management

The process of dealing with or controlling things or people, often within a business or organization.