Which of the Following Statements Is FALSE

question 40

Multiple Choice

Which of the following statements is FALSE?

• A) As long as investors can borrow or lend at the same interest rate as a firm, homemade leverage is a perfect substitute for the use of leverage by the firm.
• B) When investors use leverage in their own portfolios to adjust the leverage choice made by a firm, we say that they are using homemade leverage.
• C) The value of a firm is determined by the present value (PV) of the cash flows from its current and future investments.
• D) The investor can re-create the payoffs of unlevered equity by borrowing and using the proceeds to purchase the equity of a firm.

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Definitions:

Holland Interest Areas

A categorization within career counseling that helps individuals understand their career interests based on six typological themes developed by John L. Holland.

Hexagon

A six-sided polygon that can have either equal or unequal sides and angles.

ASVAB CEP

The Armed Services Vocational Aptitude Battery Career Exploration Program, a comprehensive career exploration and planning program available to high school and post-secondary students.

Holland Codes

A theory of careers and vocational choice based on personality types, defined by John L. Holland.