Which of the Following Statements Is False

question 6

Multiple Choice

Which of the following statements is false?

• A) When we relax the assumption of a constant debt-equity ratio, the FTE method is relatively straightforward to use and is therefore the preferred method with alternative leverage policies.
• B) When debt levels are set according to a fixed schedule, we can discount the predetermined interest tax shields using the debt cost of capital, r_D.
• C) With a constant interest coverage policy, the value of the interest tax shield is proportional to the project's unlevered value.
• D) When the firm keeps its interest payments to a target fraction of its FCF, we say it has a constant interest coverage ratio.

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Definitions:

Departmentalization

The method by which an organization divides its operations into separate units or departments based on function, product, geographic location, or customer base.

Matrix Structure

An organizational structure that combines two or more types of departmentalization, typically project and functional, to facilitate the horizontal flow of information.

Functional Structure

An organizational design where the company is divided into departments based on function or specialization, such as marketing, finance, and human resources.

Organic Structure

An organizational configuration that is flexible, decentralized, and has low levels of formalization, allowing it to adapt quickly to changes.