State true of false for the following statements. 1. If the cost of capital estimate is more

State true of false for the following statements. 

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1. If the cost of capital estimate is more than the IRR, the NPV will be positive. 2. If a coupon band is traded at premium, its yield-to-maturity should be lower than the coupon rate. 3. Managers would like to enlarge firm size via sequential merger and acquisitions because of the asymmetric information in the shareholders and outside investors, which is called Agency Problem. 4. Accelerated depreciation reduces the cash flows of a near-term project and therefore increases the project NPV. 5. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation. 6. According to MM model, in a perfect capital market, the total value of a firm is affected by the choice of capital structure due to the exist of interest tax shield. 7. When a company tends to use IPO as the way to raise capital, the costs of issuing an IPO is very low. 8. An efficient portfolio cannot be diversified further, that is there is no way to reduce the risk of the portfolio without lowering its expected return. 9. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. 10. Because the prices of the stocks do not move identically, the systematic risk can be averaged out in a portfolio. 11. If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. 12. 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. 13. Investors will pay less for a callable bond than for an otherwise identical non-callable bond 14. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy. 1. If the cost of capital estimate is more than the IRR, the NPV will be positive. 2. If a coupon band is traded at premium, its yield-to-maturity should be lower than the coupon rate. 3. Managers would like to enlarge firm size via sequential merger and acquisitions because of the asymmetric information in the shareholders and outside investors, which is called Agency Problem. 4. Accelerated depreciation reduces the cash flows of a near-term project and therefore increases the project NPV. 5. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation. 6. According to MM model, in a perfect capital market, the total value of a firm is affected by the choice of capital structure due to the exist of interest tax shield. 7. When a company tends to use IPO as the way to raise capital, the costs of issuing an IPO is very low. 8. An efficient portfolio cannot be diversified further, that is there is no way to reduce the risk of the portfolio without lowering its expected return. 9. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. 10. Because the prices of the stocks do not move identically, the systematic risk can be averaged out in a portfolio. 11. If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. 12. 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. 13. Investors will pay less for a callable bond than for an otherwise identical non-callable bond 14. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy. 1. If the cost of capital estimate is more than the IRR, the NPV will be positive. 2. If a coupon band is traded at premium, its yield-to-maturity should be lower than the coupon rate. 3. Managers would like to enlarge firm size via sequential merger and acquisitions because of the asymmetric information in the shareholders and outside investors, which is called Agency Problem. 4. Accelerated depreciation reduces the cash flows of a near-term project and therefore increases the project NPV. 5. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation. 6. According to MM model, in a perfect capital market, the total value of a firm is affected by the choice of capital structure due to the exist of interest tax shield. 7. When a company tends to use IPO as the way to raise capital, the costs of issuing an IPO is very low. 8. An efficient portfolio cannot be diversified further, that is there is no way to reduce the risk of the portfolio without lowering its expected return. 9. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. 10. Because the prices of the stocks do not move identically, the systematic risk can be averaged out in a portfolio. 11. If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. 12. 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. 13. Investors will pay less for a callable bond than for an otherwise identical non-callable bond 14. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy. 1. If the cost of capital estimate is more than the IRR, the NPV will be positive. 2. If a coupon band is traded at premium, its yield-to-maturity should be lower than the coupon rate. 3. Managers would like to enlarge firm size via sequential merger and acquisitions because of the asymmetric information in the shareholders and outside investors, which is called Agency Problem. 4. Accelerated depreciation reduces the cash flows of a near-term project and therefore increases the project NPV. 5. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation. 6. According to MM model, in a perfect capital market, the total value of a firm is affected by the choice of capital structure due to the exist of interest tax shield. 7. When a company tends to use IPO as the way to raise capital, the costs of issuing an IPO is very low. 8. An efficient portfolio cannot be diversified further, that is there is no way to reduce the risk of the portfolio without lowering its expected return. 9. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. 10. Because the prices of the stocks do not move identically, the systematic risk can be averaged out in a portfolio. 11. If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. 12. 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. 13. Investors will pay less for a callable bond than for an otherwise identical non-callable bond 14. If investors have homogeneous expectations, then each investor will identify the same portfolio as having the highest Sharpe ratio in the economy.

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Answer Question 1 False If the cost of capital estimate is more than the internal rate of return IRR the net present value NPV will be negative Questi... View the full answer