Which of the Following Statements Is FALSE

question 70

Multiple Choice

Which of the following statements is FALSE?

• A)The higher the firm's leverage,the more the firm exploits the tax advantage of debt,and the lower its WACC.
• B)Corporate taxes lower the effective cost of debt financing,which translates into a reduction in the weighted average cost of capital.
• C)Because the firm's free cash flow is computed without considering the firm's leverage,we account for the benefit of the interest tax shield by calculating the WACC using the before-tax cost of debt.
• D)The reduction in the WACC increases with the amount of debt financing.

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Definitions:

Anselm

A medieval theologian and philosopher known for his argument for the existence of God through the concept of "that than which nothing greater can be thought."

Transcendence

In the philosophy of existentialist Jean Paul Sartre, the concept that we can always transcend, or go beyond, the facts that are true of us, or what Sartre called our facticity. Transcendence means that the self is defined not by the facts about us but by what we make—and continue to make—of these facts.

Martin Luther

A German monk, theologian, and seminal figure in the Protestant Reformation who challenged the teachings of the Roman Catholic Church.

Design Argument

An argument for the existence of God or, more generally, for an intelligent creator based on perceived evidence of deliberate design in the natural or physical world.