True or False questions
1-Starting to invest early for retirement increases the benefits of compound interest.
2- If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series.
3- The market value of any real or financial asset, including stocks, bonds, or art work purchased in hope of selling it at a profit, may be estimated by determining future cash flows and then discounting them back to the present.
4- Yield to maturity is higher than the coupon interest rate if a bond is trading at Premium.
5- There exists a negative relationship between outstanding bond prices and going market interest rates.
6- 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.
7- 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.
8- 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.
9- NPV and IRR methods are based on identical assumptions regarding reinvestment rate of future cash flows.