Which of the Following Statements Is False

question 91

Multiple Choice

Which of the following statements is false?

• A) Real estate firms are likely to have low costs of financial distress, as much of their value derives from assets that can be sold relatively easily.
• B) For low levels of debt, the risk of default remains low and the main effect of an increase in leverage is an increase in the interest tax shield, which has present value τ*D, where τ* is the effective tax advantage of debt.
• C) Firms whose value and cash flows are very volatile (for example, semiconductor firms) must have much higher levels of debt to avoid a significant risk of default.
• D) The probability of financial distress depends on the likelihood that a firm will be unable to meet its debt commitments and therefore default.

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Definitions:

External Consultant

A professional who provides expert advice and a fresh perspective on organizational issues, strategies, or operations from outside the company.

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A business that sells goods or services directly to consumers from a physical location or through various online channels.

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A management approach that focuses on identifying what is working well, analyzing why it is working well, and then doing more of it.

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The activities within an organization aimed at improving one's status or position, often involving power play and tactical maneuvering.