True/False (True-A, False-B) 1. The cost of perpetual preferred stock is found as the preferred's annual dividend divided by the market price of the preferred stock. No adjustment is needed for taxes because preferred dividends, unlike interest on debt, are not deductible by the issuing firm 2. The cost of common equity obtained by retaining earnings is the rate of return the marginal stockholder requires on the firm's common stock. 3. In case of conflict, one should always choose the IRR method (over the NPV method) because the IRR is inherently superior to the NPV method. 4. For capital budgeting and cost of capital purposes, the firm should assume that each dollar of capital is obtained in accordance with its target capital structure, which for many firms means partly as debt, partly as preferred stock, and partly common equity. 5. NPV and IRR methods are based on identical assumptions regarding reinvestment rate of future cash flows