TRUE OR FALSE

13. Consider the WACC formula, there are three methods for estimating the cost of common stock from retained earnings: 1) the CAPM method, 2) the DCF method, and 3) the preferred stock-yield-plus-risk-premium method.

12.The cost of preferred stock is not considered when calculating the Weighted Average Cost of Capital.

11.In the Weighted Average Cost of Capital formula, the after-tax cost of debt is equal to one minus the marginal tax rate multiplied by the interest rate on new debt.

10. Consider the WACC formula, if the required rate of return on preferred stock increases, holding all else equal, the WACC increases.