Which of the following statements is FALSE?

A.

In a perfect market without frictions, insurance companies should compete until they are just earning a fair return and the NPV from selling insurance is zero.

B.

After purchasing fire insurance, a firm may have a lower incentive to make expenditures on fire prevention.

C.

If a firm is subject to graduated income tax rates, insurance can produce a tax savings if the firm is in a lower tax bracket when it pays the premium than the tax bracket it is in when it receives the insurance payment in the event of a loss.

D.

By insuring risks that could lead to distress, the firm can reduce the likelihood that it will incur financial distress costs.