Which of the Following Statements Is FALSE

question 69

Multiple Choice

Which of the following statements is FALSE?

• A)As long as investors can borrow or lend at the same interest rate as the 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 the firm,we say that they are using homemade leverage.
• C)The value of the 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 the firm.

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Definitions:

Inductive Reactance

The resistance to the change in current flow by an inductor in an AC circuit, measured in ohms and dependent on frequency.

Inductive Reactance

Inductive reactance is the opposition to the change in current flow by an inductor, and it increases with an increase in the frequency of the applied electric signal.

Parallel Circuit

An electrical circuit configuration where multiple paths are available for current flow, resulting in each component having the same voltage applied.

Inductor Value

The measure of an inductor's ability to store energy in a magnetic field, usually identified by its inductance, measured in henries (H).