Consider the Following Equation for the Question(s)below

question 107

Multiple Choice

Consider the following equation for the question(s) below:
E + D = U = A
-Which of the following statements is FALSE?

• A)The total market value of the firm's securities is equal to the market value of its assets, whether the firm is unlevered or levered.
• B)We can use MM Proposition I to derive an explicit relationship between leverage and the equity cost of capital.
• C)While debt itself may be cheap, it increases the risk and therefore the cost of capital of the firm's equity.
• D)Although debt does not have a lower cost of capital than equity, we can consider this cost in isolation.