Which of the following statements is FALSE?
A)Financial transactions are not sources of value,but merely serve to adjust the timing and risk of the cash flows to best suit the needs of the firm or its investors.
B)The NPV of trading a security in a normal market is zero.
C)We cannot separate a firm's investment decision from the decision of how to finance the investment.
D)In normal markets,trading securities neither creates nor destroys value.

Question

Quizplus · Accepted Answer

The investment decision and financing decision can be separated, as per the Modigliani-Miller theorem, which states that in a perfect market, the value of a firm is unaffected by how it is financed.

Which of the Following Statements Is FALSE