Which of the Following Statements Is FALSE

question 25

Multiple Choice

Which of the following statements is FALSE?

• A)Debt holders are not foolish-they recognize that when the firm defaults,they will not be able to get the full value of the assets.As a result,they will pay less for the debt initially.
• B)The costs of financial distress represent an important departure from Modigliani and Miller's assumption of perfect capital markets.
• C)Levered firms risk incurring financial distress costs that reduce the cash flows available to investors.
• D)When securities are fairly priced,the original shareholders of a firm pay the future value of the costs associated with bankruptcy and financial distress.

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Definitions:

Mental Illnesses

A wide range of mental health conditions that affect mood, thinking, and behavior.

Revised

Updated or altered from its original form, often to include new information or corrections.

Pre-menstrual Dysphoric Disorder

A severe form of premenstrual syndrome that significantly affects a woman's emotional and physical health.

DSM-IV

The fourth edition of the Diagnostic and Statistical Manual of Mental Disorders, a guide for diagnosing mental disorders.