Which of the Following Statements Is FALSE

question 50

Multiple Choice

Which of the following statements is FALSE?

• A) The Law of One Price implies that leverage will affect the total value of a firm under perfect capital market conditions.
• B) In the absence of taxes or other transaction costs, the total cash flow paid out to all of a firm's security holders is equal to the total cash flow generated by the firm's assets.
• C) With perfect capital markets, leverage merely changes the allocation of cash flows between debt and equity, without altering the total cash flows of a firm.
• D) In a perfect capital market, the total value of a firm is equal to the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure.

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Definitions:

Structure and Agency

A concept in social science that examines the interaction between the powerful, constraining social structures and the individual's ability to act independently.

Autonomy

The right or condition of self-government, or in a personal aspect, the ability of an individual to make their own choices.

Media Personnel

Individuals involved in the creation, production, and dissemination of media content, such as journalists, editors, and broadcasters.

Agency

The capacity of individuals or groups to act independently and make their own free choices.