True and False

1. If a project only earns an accounting profit to cover its operating and interest costs, it may not earn enough to cover its cost of equity, and therefore all projects are expected to earn a rate of return high enough to clear the hurdle rate.

2. The cost of preferred equity is equal to annual preferred dividend payment multiplied by the price of preferred stock.

3. To determine the cost of common stock, preferred stock, and bonds, we can simply take the market price as a given and then solve the valuation equations for the required rate of return for the common stock, preferred stock, and bonds.

4. The book-value weights are not appropriate for the calculations of the weighted average cost of capital (WACC) because the book-value weights represent the historical weights based on the prices when the securities were originally sold.