Which of the Following Statements Is FALSE

question 36

Multiple Choice

Which of the following statements is FALSE?

• A)In perfect capital markets,buying and selling securities is a zero-NPV transaction,so it should not affect firm value.
• B)Making positive-NPV investments will create value for the firm's investors,whereas saving the cash or paying it out will not.
• C)In perfect capital markets,if a firm invests excess cash flows in financial securities,the firm's choice of payout versus retention is irrelevant and does not affect the initial share price.
• D)After adjusting for investor taxes,there remains a substantial tax advantage for the firm to retain excess cash.

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Definitions:

Minimum Wage

The lowest legal hourly rate of pay that employers can compensate workers, established to protect employees from exploitation.

Equilibrium Price

The price point in the market at which the supply of goods matches the demand for those goods.

Price Floor

A government-set minimum price for goods or services, above the market equilibrium price, aimed at preventing prices from falling too low.

Price Controls

Government-imposed limits on prices charged for goods and services to manage economy.