Which of the Following Statements Is FALSE

question 75

Multiple Choice

Which of the following statements is FALSE?

• A)Holding cash has the opposite effect of leverage on risk and return.
• B)We use the market value of the firm's net debt when computing its WACC and unlevered beta to measure the cost of capital and market risk of the firm's business assets.
• C)Since the WACC does not change with the use of leverage,the value of the firm's free cash flow evaluated using the WACC does not change,and so the enterprise value of the firm does not depend on its financing choices.
• D)Even if the firm's capital structure is more complex,the WACC is calculated by computing the weighted average cost of only the firm's debt and equity.

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Definitions:

Subsidy

Financial assistance granted by the government or a public body to help an industry or business keep prices low or to encourage development.

Government Payment

Financial transfers from the government to individuals, businesses, or other entities, often in the form of subsidies, benefits, or grants.

Minimum Wage

The lowest legally allowed wage per hour that employers can pay their workers.

Medicare

A federal health insurance program in the United States for people who are 65 or older, some younger people with disabilities, and people with End-Stage Renal Disease.