Which of the Following Statements Is FALSE

question 31

Multiple Choice

Which of the following statements is FALSE?

• A) Given a forecast of future interest payments, we can determine the interest tax shield and compute its present value by discounting it at a rate that corresponds to its risk.
• B) The total value of the unlevered firm exceeds the value of the firm with leverage due to the present value of the tax savings from debt.
• C) To compute the increase in the firm's total value associated with the interest tax shield, we need to forecast how a firm's debt-and therefore its interest payments.
• D) There is an important tax advantage to the use of debt financing.

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Definitions:

Price Decrease

A reduction in the cost of goods or services, often reflective of changes in supply and demand, competition, or production costs.

Personal Computers

Electronic devices designed for individual use, capable of executing a wide range of applications, from word processing and web browsing to gaming and programming.

Normal Good

A good for which demand increases as consumer income rises, and decreases as consumer income falls.

Income Increase

An income increase refers to a rise in the amount of earnings received by an individual or household, which can affect purchasing power and economic status.