Consider the Following Equation for the Question(s) Below

question 80

Multiple Choice

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

-Which of the following statements is FALSE?

• A) While debt itself may be cheap, it increases the risk and therefore the cost of capital of the firm's equity.
• B) Although debt does not have a lower cost of capital than equity, we can consider this cost in isolation.
• C) We can use MM Proposition I to derive an explicit relationship between leverage and the equity cost of capital.
• D) The total market value of the firm's securities is equal to the market value of its assets, whether the firm is unlevered or levered.

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Definitions:

Stimulus Adaptation

A decrease in response to a stimulus after repeated presentations, as the receptor cells become less sensitive to the stimulus.

Response Generalization

The tendency for the effects of training in one response to spread to other, similar responses.

Transfer of Habit Strength

The process by which the learning and strengthening of a habit in one context or task can influence performance in another context or task.

Conditioned Response

A learned response to a previously neutral stimulus that has become conditioned through association.