Which of the Following Statements Is FALSE

question 49

Multiple Choice

Which of the following statements is FALSE?

• A) The actual cash flow that the investor will get to keep will be reduced by the amount of any tax payments.
• B) The equivalent after-tax interest rate is r(1 - τ).
• C) The right discount rate for a cash flow is the rate of return available in the market on other investments of comparable risk and term.
• D) To compensate for the risk that they will receive less if the firm defaults, investors demand a lower interest rate than the rate on U.S. Treasuries.

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