Which of the following statements is FALSE?
A)For capital budgeting purposes,the project's financing is the incremental financing that results if the firm takes on the project.
B)Projects with safer cash flows can support more debt before they increase the risk of financial distress for the firm.
C)If the positive free cash flow from a project will increase the firm's cash holdings,then this growth in cash is equivalent to a reduction in the firm's leverage.
D)The incremental financing of a project corresponds directly to the financing that is directly tied to the project.

Question

Quizplus · Accepted Answer

The statement in option D is false. The incremental financing of a project is not directly tied to the financing that is directly tied to the project. Instead, it refers to the financing that the firm needs to take on in order to undertake the project, which may include both project-specific financing as well as additional financing to support the increased investment.

Which of the Following Statements Is FALSE