Which of the Following Statements Is FALSE

question 79

Multiple Choice

Which of the following statements is FALSE?

• A)Real estate firms are likely to have low costs of financial distress,as much of their value derives from assets that can be sold relatively easily.
• B)For low levels of debt,the risk of default remains low and the main effect of an increase in leverage is an increase in the interest tax shield,which has present value τ*D,where τ* is the effective tax advantage of debt.
• C)Firms whose value and cash flows are very volatile (for example,semiconductor firms)must have much higher levels of debt to avoid a significant risk of default.
• D)The probability of financial distress depends on the likelihood that a firm will be unable to meet its debt commitments and therefore default.

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Definitions:

Ectasis

A medical term referring to the dilation or expansion of a hollow structure or organ.

Iasis

A suffix used in medical terminology to denote conditions, diseases, or infestations.

Crine

Relating to or denoting glands that secrete hormones or other products directly into the blood (endocrine) or outwardly through ducts (exocrine).

Pan-

A prefix meaning "all" or "every", often used in medical and scientific terminology.