Which of the Following Statements Regarding Recapitalizations Is FALSE

question 43

Multiple Choice

Which of the following statements regarding recapitalizations is FALSE?

• A)With a recapitalization,even though leverage reduces the total value of equity,shareholders capture the benefits of the interest tax shield up front.
• B)The share price always rises after the completion of the recapitalization.
• C)Leveraged recaps were especially popular in the mid- to late-1980s,when many firms found that these transactions could reduce their tax payments.
• D)When a firm makes a significant change to its capital structure,the transaction is called a recapitalization.

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Definitions:

Myxoma Virus

A leporipoxvirus that causes myxomatosis, a disease in rabbits and hares characterized by skin tumors and often leads to death.

Virulent

Characterized by a high degree of pathogenicity; capable of causing disease.

Transmission

The process of transferring something from one place, person, or organism to another, used in various contexts including genetics and infectious diseases.

Parasitism Success

The effectiveness with which a parasite is able to infect, exploit, and potentially reproduce within its host organism.