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Which of the following statement is correct? An increase in the market value (price) of a preferred stock will increase the cost of preferred stock.
Which of the following statement is correct? An increase in the market value (price) of a preferred stock will increase the cost of preferred stock. If market interest rates rise then both the cost of equity and debt will decrease. The cost of preferred stock is negatively affected by the issuer's tax rate. All the answers are incorrect. O Interest expense reduces a firm's tax liability and therefore this reduction in taxes reduces the cost of debt. Which of the following statement is incorrect? Most of the answers are correct. Two methods to determine the cost of common equity are a) Dividend Growth Model and b) Capital Asset Pricing Model. O Corporations may either retain the residual earnings or return them in the form of common stock dividends. The cost of issuing the new securities, known as flotation cost, includes investment bankers' fees and commissions, and attorneys' fees. With respect to the cost of capital, we are generally interested in the cost of investing, such as NPV or IRR on a particular date. Which of the following statement is incorrect? Accept the project if the IRR is greater than or equal to the required rate of return (k). O Independent projects are the projects that do not compete with each other. O Most of the answers are correct. O If the projects are independent, then accept all the projects where NPV is less than 0, reject otherwise. To calculate the payback period, simply add up a project's projected positive cash flows, one period at a time, until the sum equals the amount of the project's initial investment
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