It Is Not Correct to Discount the Cash Flows of a Levered

question 95

Multiple Choice

It is not correct to discount the cash flows of a levered firm with the cost of equity of the unlevered firm because

• A)leverage changes the unlevered cost of equity.
• B)cost of debt decreases in this setting.
• C)leverage decreases the risk of equity of the firm.
• D)leverage increases the risk of the equity of the firm.

---

Definitions:

Situational Events

Circumstances or occurrences that happen at a particular time and place, often influencing the outcome of scenarios.

Business Report

A document that presents analysis and information regarding business performance and objectives.

Collecting Data

The systematic gathering of information or statistics for analysis or research purposes.

Determining Purpose

The process of defining the reason or objective behind an action, project, or piece of work.