Which of the following statements is FALSE? a. As debt has a lower cost of...
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Accounting
Which of the following statements is FALSE?
a. As debt has a lower cost of capital than equity, higher leverage lowers a firms WACC.
b. with perfect capital markets, a firms WACC is dependent on its capital structure and is equal to its equity cost of capital only if e firm is unlevered.
c. with no debt, the WACC is equal to the unlevered equity cost of capital.
d. As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firms WACC is unchanged.
2. Which of the following statements is FALSE?
a. The practice of maintaining relatively constant dividends is called dividend smoothing
b. The idea that dividend changes reflect managers views about a firms future earnings prospect is called the signaling hypothesis.
c. Firms can change dividends at any time, and in practice they vary the sizes of their dividends very frequently.
d. Empirical evidence about the behaviour of financial managers suggests that firms smooth dividend payments but not repurchase activity.
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