Consider the Following Equation for the Question(s)below

question 90

Multiple Choice

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

• A)The unlevered beta measures the market risk of the firm without leverage, which is equivalent to the beta of the firm's assets.
• B)When a firm changes its capital structure without changing its investments, its levered beta will remain unaltered, however, its asset beta will change to reflect the effect of the capital structure change on its risk.
• C)If a firm holds $1 in cash and has $1 of risk-free debt, then the interest earned on the cash will equal the interest paid on the debt. The cash flows from each source cancel each other, just as if the firm held no cash and no debt.
• D)The unlevered beta measures the market risk of the firm's business activities, ignoring any additional risk due to leverage.

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Definitions:

Redundancies

Unnecessary repetitions or overlaps in content, information, or employees within an organization, often leading to inefficiencies.

Unnecessary Words

Superfluous or extraneous words in writing or speech that do not add value to the message and can often be omitted for clarity and conciseness.

Double Modifiers

The use of two adjectives or adverbial elements side by side to modify the same noun or verb, often to enhance the descriptive quality.

Awkward References

Inappropriate or out-of-place mentions or citations in a conversation or piece of writing.