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:

Afternoon Nap

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Documented Outcome

The recorded result or impact of a treatment or intervention, often used to assess its effectiveness.

Family Member

A family member refers to someone who is part of one's immediate or extended family, including parents, siblings, spouses, and relatives by blood or marriage.