Which of the Following Statements Is False

question 26

Multiple Choice

Which of the following statements is false?

• A) From a theoretical standpoint,the capital weights used to calculate the WACC should be based on the market values of the different securities.However,if a firm's book value weights are close to its market value weights,book value weights can be used as proxies.
• B) Generally,only long-term debt is included in the calculation of the WACC,because the WACC is used for capital budgeting purposes,which includes long-term assets,and those assets are financed with long-term capital.
• C) The first break point a firm encounters in capital budgeting is for retained earnings,unless a firm has zero or negative net income.
• D) The weighted average cost of capital will change whenever a break point occurs.
• E) Answers a and b are both false.

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Definitions:

Vocabulary Expansion

The process of learning and acquiring new words to increase the breadth of one's language understanding and expression.

Logical Extension

An advancement of an idea, argument, or discussion that naturally follows from the original premise or concept.

Fast-Mapping

The process by which children are able to learn the meaning of new words quickly, based on very limited exposure.

Overregularization

The application of rules of grammar even when exceptions occur, making the language seem more “regular” than it actually is.