Which of the Following Statements Is FALSE

question 53

Multiple Choice

Which of the following statements is FALSE?

• A)With no debt,the WACC is equal to the unlevered equity cost of capital.
• B)With perfect capital markets,a firm's WACC is dependent of its capital structure and is equal to its equity cost of capital only the firm it is unlevered.
• C)As the firm borrows at the low cost of capital for debt,its equity cost of capital rises,but the net effect is that the firm's WACC is unchanged.
• D)Although debt has a lower cost of capital than equity,leverage does not lower a firm's WACC.

---

Definitions:

Subject

The topic or main idea of a document, conversation, or area of study.

Predicate

In grammar, the part of a sentence or clause that expresses what is said about the subject and usually includes a verb.

Unneeded Words

Words in a text that do not add any real value to its meaning and can be removed without altering the message.

Clarity

The quality of being clear and easy to understand.