Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)When we relax the assumption of a constant debt-equity ratio,the FTE method is relatively straightforward to use and is therefore the preferred method with alternative leverage policies.
• B)When debt levels are set according to a fixed schedule,we can discount the predetermined interest tax shields using the debt cost of capital,r_D.
• C)With a constant interest coverage policy,the value of the interest tax shield is proportional to the project's unlevered value.
• D)When the firm keeps its interest payments to a target fraction of its FCF,we say it has a constant interest coverage ratio.

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Definitions:

Contingent Consideration

A future payment in a transaction that is dependent on specific outcomes or events.

IFRS 3

Refers to the International Financial Reporting Standard that covers the accounting treatment for all business combinations, including the recognition and measurement of goodwill and determination of fair value for identifiable assets and liabilities.

Business Combinations

The uniting of separate companies, assets, or entities into one through various types of financial transactions, including mergers and acquisitions.

Journal Entry

A record in accounting that notes a specific financial transaction in a company's books, involving debits and credits to various accounts.