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:

Surveys

A method of gathering information from individuals, usually by asking a series of questions, to collect data for analysis related to research or feedback purposes.

Personal Power

Power that is associated with admiration by others, which comes from such attributes as strength of character, passion, inspiration, or wisdom.

Position Power

Power that is related to the authority associated with a role or title and includes the power to manage people or command resources.

Informal Leader

A person who influences others within an organization or group without having a formal authority or position.