Which of the Following Statements Is False

question 45

Multiple Choice

Which of the following statements is false?

• A) In perfect capital markets, buying and selling securities is a zero-NPV transaction, so it should not affect firm value.
• B) Making positive-NPV investments will create value for the firm's investors, whereas saving the cash or paying it out will not.
• C) In perfect capital markets, if a firm invests excess cash flows in financial securities, the firm's choice of payout versus retention is irrelevant and does not affect the initial share price.
• D) After adjusting for investor taxes, there remains a substantial tax advantage for the firm to retain excess cash.

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Definitions:

Maderno's Design

The architectural plan by Carlo Maderno for the façade and extension of St. Peter's Basilica in Vatican City, which marked the transition from Renaissance to Baroque architecture.

Santa Susanna

A historic Catholic church in Rome, Italy, known for its Late Renaissance architecture and considered a titular church with a long history.

Pope Paul V

The head of the Roman Catholic Church and ruler of the Papal States from 1605 to 1621, known for his role in the Counter-Reformation and his support of the arts.

Maderno

A reference to Carlo Maderno, an Italian architect who is considered one of the pioneers of Baroque architecture in the early 17th century.