Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A) As long as a firm's choice of securities does not change the cash flows generated by its assets, the capital structure decision will not change the total value of the firm or the amount of capital it can raise.
• B) If securities are fairly priced, then buying or selling securities has a net present value (NPV) of zero and, therefore, should not change the value of a firm.
• C) The future repayments that the firm must make on its debt are equal in value to the amount of the loan it receives up front.
• D) An investor who would like more leverage than the firm has chosen can lend and add leverage to his or her own portfolio.

Understand the implications of different dividend theories, including dividend irrelevance and bird-in-the-hand theories.

Identify the objectives and impacts of dividend policies on firm value and capital costs.

Comprehend the process and significance of dividend payments and announcements.

Assess the relationship between dividend policies, investment opportunities, and firm growth strategies.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, with holders typically having voting rights and potentially receiving dividends.

Short-Sell

The practice of selling borrowed securities with the aim of buying them back at a lower price in the future to profit from a decline in price.

Maximum Possible Loss

The worst-case scenario loss that an investor or business could experience in their investment or operation.

Initial Margin

Initial Margin is the minimum amount of capital required to enter a position for trading in the securities market.