1)True or false: You can create a riskless two-stock portfolio if you have two stocks that are perfectly positively correlated.

2)True or false: If an expected stock return is above the SML, then the stock is overvalued.

3)True or false: Generally speaking, the cost of equity is cheaper than the cost of debt.

4)True or false: The cost of preferred stock creates a tax shield (tax savings).

5)True or false: It is NOT appropriate to use the firms weighted average cost of capital when the firm is considering extending a current project.

6)True or false: Based on the PI decision rule, you accept a project if the PI is greater than 0.

7)True or false: When you have to rank multiple projects, the internal rate of return method is the way to go.

8)True or false: The sales price of old equipment that is replaced by new equipment is included in the capital budgeting calculation.