Consider the Following Equation for the Question(s)below

question 50

Multiple Choice

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

• A)The levered equity return equals the unlevered return, plus an extra 'kick' due to leverage.
• B)The cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value debt-equity ratio.
• C)By holding a portfolio of the firm's equity and its debt, we can replicate the cash flows from holding its levered equity.
• D)If a firm is unlevered, all of the free cash flows generated by its assets are available to be paid out to its equity holders.

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