Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)The tax deductibility of interest lowers the effective cost of debt financing for the firm.
• B)When a firm uses debt financing,the cost of the interest it must pay is offset to some extent by the tax savings from the interest tax shield.
• C)With tax-deductible interest,the effective after-tax borrowing rate is r(τ_C).
• D)The WACC represents the cost of capital for the free cash flow generated by the firm's assets.

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Definitions:

Partner

A partner is an individual or entity engaged in a partnership, sharing the profits, losses, and management responsibilities within the business agreement.

Net Income

The leftover financial gain of a corporation once expenses and taxes are deducted from the total revenue.

Salary

A fixed regular payment, typically monthly or biweekly, made by an employer to an employee, especially a professional or white-collar worker.

Interest Allowances

Financial incentives or rebates given to borrowers, typically reducing the amount of interest they need to pay on loans.