Which of the following statements is CORRECT?

A.

Corporations cannot buy the preferred stocks of other corporations.

B.

Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.

C.

The preferred stock of a given firm is generally less risky to investors than the same firms common stock.

D.

Preferred dividends are not generally cumulative.

QUESTION 1

Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the firms total corporate value.

True

False

QUESTION 11

Which of the following statements is CORRECT?

	A.	Two firms with the same expected dividend and growth rate must also have the same stock price.
	B.	The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
	C.	The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
	D.	It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.