Which of the following statements is false? a. Over time, the market value of as

Question

Which of the following statements is false?

a. Over time, the market value of assets will almost always diverge from their historical book value.

b. Book value is an accounting summary of value and is inferior to market value as a source of current information regarding the true value of the firm.

c. While marginal and average tax rates often differ, it is the average tax rate that is relevant for most financial decisions.

d. Financial managers should rely on market values, and not book values, when making decisions for the firm’s strategic direction.

e. The cash flow identity states that all net cash flows earned by the firm are distributed in whole to its creditors and shareholders.

Explanation / Answer

c. While marginal and average tax rates often differ, it is the average tax rate that is relevant for most financial decisions.

the above is the answer

because marginal tax rate matters as it is the rate applicable on incremental incomes.

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