Which of the Following Statements Is FALSE

question 73

Multiple Choice

Which of the following statements is FALSE?

• A)For capital budgeting purposes,the project's financing is the incremental financing that results if the firm takes on the project.
• B)Projects with safer cash flows can support more debt before they increase the risk of financial distress for the firm.
• C)If the positive free cash flow from a project will increase the firm's cash holdings,then this growth in cash is equivalent to a reduction in the firm's leverage.
• D)The incremental financing of a project corresponds directly to the financing that is directly tied to the project.

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Definitions:

Estimated Bad Debts

A provision for accounts receivable that are not expected to be collected.

Net Income

The total earnings of a company after deducting all expenses, taxes, and costs from its total revenues, indicating the company's profitability.

Liabilities

Financial obligations or debts that a company owes to others, due to past transactions or events.

Net Assets

The residual interest in the assets of an entity after deducting its liabilities, essentially representing the owners' equity.