Which of the following statements is FALSE?
A)MM Proposition I applies to capital structure decisions made at any time during the life of the firm.
B)When a firm issues new shares that account for a significant percentage of its outstanding shares, the transaction is called a 'leveraged recapitalisation'.
C)The choice of capital structure does not change the value of the firm if the cash flows generated by the firm's assets are assumed to remain constant.
D)By choosing positive-NPV projects that are worth more than their initial investment, the firm can enhance its value.

Question

Quizplus · Accepted Answer

When a firm issues new shares that account for a significant percentage of its outstanding shares, the transaction is called a 'dilutive recapitalisation', not a 'leveraged recapitalisation'. A leveraged recapitalisation typically involves a significant increase in debt in order to finance a share buyback or dividend payment.

Which of the Following Statements Is FALSE