Which of the Following Is True of the Capital Structure

question 13

Multiple Choice

Which of the following is true of the capital structure irrelevance theorem?

• A)If two firms are identical in their capital structures,there is no opportunity to earn arbitrage profits exists if the total values of the two firms are not the same.
• B)If the capital structure decision has no effect on the total cash flows that a firm can distribute to its debt and equity holders the decision will only affect the firm?s equity.
• C)If two firms are identical except for their capital structures,an opportunity to earn arbitrage profits exists if the total values of the two firms are not the same.
• D)If the capital structure decision has no effect on the total cash flows that a firm can distribute to its debt and equity holders then the levered cash flows will be less than the unlevered cash flows.

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Definitions:

Latency Stage

In Freud’s psychoanalytic theory, the fourth stage of psychosexual development, characterized by repression of sexual impulses and development of skills.

Freud's Stage

Stages of psychological development theorized by Freud, emphasizing sexual and aggressive urges shaping personality.

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Pertaining to twins that developed from a single fertilized ovum, making them genetically identical.

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An intense fear or dread of going to school, often resulting from anxiety about academic performance, social relationships, or separation from caretakers.