21. Mr. MOHAMMED company, The Problem Solvers, wants to issue new preferred stock. The preferred dividend is $3.00 per share, the stock can be sold for $30, and the flotation costs are$1. What is the cost of preferred stock, kp?

a.

9.34%

b.

11.34%

c.

10.34%

d.

12.34%

5. Bethlehem corp. borrows $20,000 at 5% and invests in a new machine with a useful life of 5 years. The new Machine generates additional revenues of $10,000/year and additional cost of $2,000/year. The corporation tax rate is 30%. The depreciation on this machine is

a.

2,000

b.

4,000

c.

8,000

d.

2,000

24. What is the decision rule for accepting or rejecting proposed projects when using net present value?

a.

When using the net present value decision rule any project with a net present value less than or equal to the value of the projects would be acceptable.

b.

When using the net present value decision rule any project with a net present value greater than or equal to zero would be acceptable.

c.

Any project with a positive and negative net present value would be rejected.

d.

negative or positive NPV does not really affect the value of the firm