1. “Financial modeling attempts to replicate every detail of the financial world.” True or False. Explain.
2. The cost of preferred stock to a firm must be adjusted to an after-tax figure because 70% of dividends received by a corporation may be excluded from the receiving corporation's taxable income. True or False
3. The cost of debt is equal to one minus the marginal tax rate multiplied by the interest rate on new debt. True or False
4. The cost of common equity obtained by retaining earnings is the rate of return the marginal stockholder requires on the firm's common stock. True or False