Which of the Following Statements Is FALSE

question 40

Multiple Choice

Which of the following statements is FALSE?

• A) As long as investors can borrow or lend at the same interest rate as a firm, homemade leverage is a perfect substitute for the use of leverage by the firm.
• B) When investors use leverage in their own portfolios to adjust the leverage choice made by a firm, we say that they are using homemade leverage.
• C) The value of a firm is determined by the present value (PV) of the cash flows from its current and future investments.
• D) The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of a firm.

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Definitions:

Median

The middle number in a ranked set of numbers.

Presenting Information

The process of delivering data, findings, or knowledge to an audience in a structured and comprehensible manner.

Passive Verbs

Verbs that indicate actions done to the subject rather than the subject doing the action, often used to shift focus or be less direct.

Topic Sentences

Sentences that introduce the main idea or theme of a paragraph, providing a summary for the content that follows.