Consider the Following Equation for the Question(s) Below

question 98

Multiple Choice

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

-Which of the following statements is FALSE?

• A) With no debt, the WACC is equal to the unlevered equity cost of capital.
• B) With perfect capital markets, a firm's WACC is dependent on its capital structure and is equal to its equity cost of capital only if the firm is unlevered.
• C) As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firm's WACC is unchanged.
• D) As debt has a lower cost of capital than equity, higher leverage lowers a firm's WACC.

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Definitions:

Convert Ammonia

The biochemical process of transforming ammonia into urea or other safe compounds for excretion, primarily occurring in the liver.

Disaccharides

Carbohydrates composed of two monosaccharides joined together, such as lactose, sucrose, and maltose, important in nutrition and metabolism.

Bile Secretion

The process by which the liver produces bile, a substance that helps digest fats.

Cystic Duct

A tube that transports bile from the gallbladder into the common bile duct and then into the small intestine.