true or false:

1. The current risk premium is found as the difference between an estimate of the current expected rate of return on common stocks, and the current expected yield on T-Bills/Bonds. ( )

2. The component cost of debt is the after-tax cost of new debt. ( )

(cl To obtain the cost of common stock, you (a) take the firm's estimated beta, {b} multiply this beta by the market risk premium to determine the firm's risk premium, and (c) add the firm's risk premium to the risk free rate and this will provide the cost of common stock.( )

{d) The payback period is the number of years required to recover a project cost/investment. This period ignores cash flows beyond the payback period, and it does not consider the time-value of money. { )

{e) The NPV and IRR methods make the same accept/reject decisions for independent projects, but if projects are mutually exclusive, then ranking conflicts can arise. If conflicts arise, the IRR should be used. ( )