Which of the Following Statements Is FALSE

question 56

Multiple Choice

Which of the following statements is FALSE?

• A)The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets,a firm's security choice alters the risk of the firm's equity,but it does not change its value or the amount it can raise from outside investors.
• B)When agency costs are significant,short-term debt may be the most attractive form of external financing.
• C)Too much debt can motivate managers and equity holders to take excessive risks or over-invest in a firm.
• D)Of all the different possible imperfections that drive capital structure,the most clear-cut,and possibly the most significant,is taxes.

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Definitions:

Replacement Rate

Replacement rate is a demographic term describing the number of births needed per woman to maintain a population's size over time, typically considered to be approximately 2.1 children per woman in developed countries.

Economically Advanced Nations

Countries with highly developed economies, characterized by high per capita income, diversified industries, and advanced technological infrastructure.

Ethnically Homogenous

Describing a population that shares a common ethnicity or cultural background.

Traditional Moral Values

Cultural, ethical, and moral standards and norms that have been historically upheld and transmitted within a society or community.