Which of the following statements if false?
A) Franco Modigliani and Metron Miller argued that with perfect capital markets the total value of a firm should not depend on its capital structure
B) It is inappropriate to discount the cash flows of leveraged equity at the same discount rate that we use of unlettered equity
C) leverage decreases the risk of equity on a firm
D) because the cash flows of the debt and equity sum to the cash flows of the project, the combined values of debt and equity must be equal to the cash flows of the project
Which of the following statements is false?
A) aside from the direct legal and administrative cost of bankruptcy, many other indirect costs are associated with financial distress (whether or not the firm has formally filed for bankruptcy)
B) Bankruptcy protection can be used my management to help the liquidation of a firm that should be shut down.
C) although indirect costs of bankruptcy are difficult to measure accurately, they are typically much smaller than the direct costs of bankruptcy
D) chapter 11 reorganization plans must be voted by different creditors: if an acceptable plan is not put forth, then the firm goes to chapter 7