Which of the following statements is false?
A) With perfect capital markets, all securities are fairly priced and issuing securities is a zero-NPV transaction.
B) The fees associated with the financing of the project are independent of the project's required cash flows and should be ignored when calculating the NPV of the project.
C) When a firm borrows funds, a mispricing scenario arises if the interest rate charged differs from the rate that is appropriate given the actual risk of the loan.
D) The WACC, APV, and FTE methods determine the value of an investment incorporating the tax shields associated with leverage.

Question

Quizplus · Accepted Answer

The fee associated with financing is a cash outflow that should be included in the calculation of the project's NPV. Therefore, ignoring the fees would result in an inaccurate calculation of the project's net present value. Choices A, C, and D are all true statements.

Which of the Following Statements Is False