Which of the Following Statements Is FALSE

question 16

Multiple Choice

Which of the following statements is FALSE?

• A)The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of the firm.
• B)When investors use leverage in their own portfolios to adjust the leverage choice made by the firm, we say that they are using homemade leverage.
• C)The value of the firm is determined by the present value (PV)of the cash flows from its current and future investments.
• D)As long as investors can borrow or lend at the same interest rate as the firm, homemade leverage is a perfect substitute for the use of leverage by the firm.

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Definitions:

Recall

The mental process of retrieving information from the past.

Recognition

The cognitive process of identifying and acknowledging the presence or existence of something.

Implicit Memory

A type of memory in which previous experiences aid in the performance of a task without conscious awareness of these previous experiences.

Crossword Puzzle

A word game in which players fill in a grid of squares with words that intersect at common letters, based on clues provided.