Which of the Following Statements Is FALSE

question 57

Multiple Choice

Which of the following statements is FALSE?

• A)The tradeoff theory weighs the costs of debt that result from shielding cash flows from taxes against the benefits from the effects of financial distress associated with leverage.
• B)Leverage has costs as well as benefits.
• C)According to the tradeoff theory,the total value of a levered firm equals the value of the firm without leverage plus the present value of the tax savings from debt,less the present value of financial distress costs.
• D)Firms have an incentive to increase leverage to exploit the tax benefits of debt.But with too much debt,they are more likely to risk default and incur financial distress costs.

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Definitions:

Mirror Neurons

Neurons that activate both when an individual performs an action and when they observe the same action performed by another, thought to be fundamental to learning and empathy.

Mentally Simulating

The process of imagining or recreating experiences in the mind, often used as a method of learning or preparing for actual events.

Modeling

A method of learning that involves observing and imitating others.

Online Videos

Digital video content available on the internet, which can be accessed on demand through various platforms and devices.