Which of the Following Statements Is FALSE

question 17

Multiple Choice

Which of the following statements is FALSE?

• A)Even after adjusting for personal taxes,the value of an unlevered firm exceeds the value of a levered firm,and there is a tax advantage to using debt financing.
• B)In Modigliani and Miller's setting of perfect capital markets,firms could use any combination of debt and equity to finance their investments without changing the value of the firm.
• C)When firms raise new capital from investors,they do so primarily by issuing debt.
• D)In most years aggregate equity issues are negative,meaning that firms are reducing the amount of equity outstanding by buying shares.

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Definitions:

Business Risk

The possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit.

Financial Characteristics

The key attributes and figures that define the financial health and performance of a business or investment.

Debt

Debt represents money borrowed and to be repaid, typically with interest, by individuals or entities such as corporations and governmental bodies.

Debt Financing

A method of raising capital whereby a company borrows money through issuing bonds or taking out loans, to be repaid over time with interest.