Which of the Following Statements Is FALSE

question 76

Multiple Choice

Which of the following statements is FALSE?

• A)The Law of One Price implies that leverage will affect the total value of the firm under perfect capital market conditions.
• B)In the absence of taxes or other transaction costs,the total cash flow paid out to all of a firm's security holders is equal to the total cash flow generated by the firm's assets.
• C)With perfect capital markets,leverage merely changes the allocation of cash flows between debt and equity,without altering the total cash flows of the firm.
• D)In a perfect capital market,the total value of a firm is equal to the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure.

---

Definitions:

Human Capital

The collective skills, knowledge, and expertise that employees bring to their workplace, contributing to its value and performance.

Economic Value

The worth of a good or service determined by the benefits it provides weighed against its cost.

Job-relevant Knowledge

Information and understandings that are directly applicable to performing tasks and responsibilities in a specific job context.

Skills

The abilities or expertise acquired through training or experience that enable an individual to perform tasks effectively.