It Is Not Correct to Discount the Cash Flows of a Levered

question 75

Multiple Choice

It is not correct to discount the cash flows of a levered firm with the cost of equity of the unlevered firm because ________.

• A) leverage decreases the risk of equity of the firm
• B) leverage changes the unlevered cost of equity
• C) leverage increases the risk of the equity of the firm
• D) cost of debt decreases in this setting

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Definitions:

Time Discipline

The social and economic practice of coordinating and regulating human activities and work efficiency through the strict measurement and management of time.

Labor Movement

A socio-political movement advocating for the rights and interests of workers, including better working conditions, higher wages, and collective bargaining.

South

A reference often used in the context of the United States to designate the southeastern states, historically characterized by their support for slavery and later segregation.

Abolitionists

Individuals or groups advocating for the immediate end of slavery and the emancipation of slaves, active primarily in the 18th and 19th centuries.