Which of the following statements is FALSE? (a) Leverage decreases the risk of the equity of...
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Which of the following statements is FALSE? (a) Leverage decreases the risk of the equity of a firm. (b) Because the cash flows of the debt and equity sum to the cash flows of the project, by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project. (c) It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity. Which of the following statements is FALSE? (a) Leverage decreases the risk of the equity of a firm. (b) Because the cash flows of the debt and equity sum to the cash flows of the project, by the Law of One Price the combined values of debt and equity must be equal to the cash flows of the project. (c) It is inappropriate to discount the cash flows of levered equity at the same discount rate that we use for unlevered equity.
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The FALSE statement is a Leverage decreases the risk of the equity of a firm Leverage actually incre... View the full answer
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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