Which of the Following Statements Is FALSE

question 52

Multiple Choice

Which of the following statements is FALSE?

• A)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.
• B)The Law of One Price implies that leverage will affect the total value of the firm under perfect capital market conditions.
• C)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.
• D)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.

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Definitions:

Death Instincts

The unconscious drive toward decay, destruction, and aggression.

Preconscious

Pertains to thoughts and feelings not immediately in conscious awareness but can be readily brought to consciousness.

Personality Structure

The organization and dynamics of individual personality components, including traits, attitudes, and behaviors that define a person's unique personality.

Psychoanalysis

Sigmund Freud’s theory of personality and system of therapy for treating mental disorders.