Which of the Following Statements Is FALSE

question 62

Multiple Choice

Which of the following statements is FALSE?

• A)The firm's unlevered cost of capital is equal to its pre-tax weighted average cost of capital - that is,using the pre-tax cost of debt,r_d,rather than its after-tax cost,r_d (1 - τ_c ).
• B)A firm's levered cost of capital is a weighted average of its equity and debt costs of capital.
• C)When the firm maintains a target leverage ratio,its future interest tax shields have similar risk to the project's cash flows,so they should be discounted at the project's unlevered cost of capital.
• D)The first step in the APV method is to calculate the value of free cash flows using the project's cost of capital if it were financed without leverage.

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Definitions:

Cognitive Functions

Mental processes that include thinking, understanding, learning, and remembering.

Liver Cirrhosis

A chronic liver disease marked by scarring of liver tissue, which can lead to liver failure and other complications, often caused by alcohol abuse or hepatitis.

Fetal Alcohol Syndrome

A condition resulting from alcohol consumption by the mother during pregnancy, causing physical and mental developmental issues in the child.

Miscarriage

The spontaneous loss of a pregnancy before the fetus can survive outside the womb, typically before 20 weeks of gestation.