Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A) To determine the project's debt capacity for the interest tax shield calculation, we need to know the value of the project.
• B) To compute the present value of the interest tax shield, we need to determine the appropriate cost of capital.
• C) Because we don't value the tax shield separately, with the APV method we need to include the benefit of the tax shield in the discount rate as we do in the WACC method.
• D) A target leverage ratio means that the firm adjusts its debt proportionally to the project's value or its cash flows.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Net Credit Sales

The total revenue from sales made on credit minus any returns or allowances, representing the actual amount expected to be collected from customers.

Horizontal Analysis

A financial analysis technique that compares historical financial data over a series of reporting periods to identify trends and changes.

Notes Receivable

Written promise (as evidenced by a formal instrument) for amounts to be received.