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 incremental financing of a project does not necessarily correspond directly to the financing that is directly tied to the project. The project's financing may include financing that is not related to the project, such as refinancing of existing debt or issuance of new equity.

Which of the Following Statements Is False