10-Which of the following statements is INCORRECT? Select one:

a. The cost of common equity of a corporation may be estimated using either the Dividend Valuation Model or the Capital Asset Pricing Model.

b. If a company tax rate decreases, then its weighted average cost of capital increases. c. The Capital Asset Pricing Model may be used to estimate the cost of debt.

d. The cost of capital is the rate that must be earned on an investment project, if the project is to increase the value of the common shareholders investment.

11-Which of the following statements is CORRECT? Select one:

a. The value of a bond is the present value of both the future coupon payments and the face value of the bond.

b. The yield-to-maturity on the bond varies from investor to investor because each investor has his or her own required return.

c. If a bond has a market value that is HIGHER than its face value, then it is a DISCOUNT bond. d. The value of a bond is directly related to changes in the yield-to-maturity on the bond.

12-The type of financing that is affected by corporate taxes is: Select one:

a. debt

b. ordinary stock

c. common stock d. preferred stock

16-PREFERRED stock is similar to a BOND in that:

Select one:

a. Preferred stock is not like bonds in any way.

b. Dividend payments to preferred shareholders, much like bond interest payments to bondholders, are tax deductible.

c. Preferred stockholders receive a dividend payment, much like interest payments to bondholders, which is usually fixed.

d. Investors can sue the firm, if preferred dividend payments are not paid, much like bondholders can sue for non-payment of interest payments.