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:

Psychological Disorders

Mental health conditions characterized by disturbances in thought, emotion, or behavior, leading to distress or impaired functioning.

DSM-IV-TR

The Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, Text Revision; a guide used by healthcare professionals to diagnose mental disorders.

American Psychiatric Association

A professional organization of psychiatrists aimed at advancing the understanding and treatment of mental disorders.

Diagnostic

Pertaining to the identification of the nature or cause of a health problem, often involving analysis of symptoms and tests.