Consider the Following Equation for the Question(s) Below

question 108

Multiple Choice

Consider the following equation for the question(s) below.

-Which of the following statements is FALSE?

• A) The levered equity return equals the unlevered return plus an extra "kick" due to leverage.
• B) By holding a portfolio of a firm's equity and its debt, we can replicate the cash flows from holding its levered equity.
• C) 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.
• 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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