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.

---

Definitions:

Sequential Interdependence

An organizational model in which one team member completes a piece of work and passes it on to the next member for their input, similar to an assembly line.

Pooled Interdependence

An organizational model in which each team member produces a piece of work independently of the other members.

Interdependence

A mutual reliance between two or more groups or things where each is dependent on the other, creating a reciprocal relationship.

Cultural Challenges

Difficulties and obstacles that arise due to differences in cultural backgrounds, beliefs, practices, and values among individuals or groups.