Which of the Following Statements Is FALSE

question 95

Multiple Choice

Which of the following statements is FALSE?

• A)Even though firms have not issued new equity,the market value of equity has risen over time as firms have grown.
• B)While firms seem to prefer debt when raising external funds,not all investment is externally funded.
• C)To receive the full tax benefits of leverage a firm needs to use 100% debt financing.
• D)If bankruptcy is costly,these costs might offset the tax advantages of debt financing.

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Definitions:

Short-Run Cost Curves

Graphical representations that show the relationship between a firm's costs and output levels in the short term.

Long-Run Curve

The graphical representation in economics of the relationship between output and input when all inputs are variable, showing potential economies of scale.

Marginal-Cost Curve

A graph that displays the cost of producing one additional unit of a good or service.

Average-Total-Cost Curve

A graph that displays the mean total cost of manufacturing across various output quantities, generally characterized by a U-shape because of the effects of economies and diseconomies of scale.