True / False Questions:

9. A lower dividend yield exacerbates the principal agent problem between shareholders and management.

10. Firms in the death stage typically will cut their dividend in order to preserve retained earnings.

11. If a new machine is predicted to yield 12% for the coming six years, the firm should buy this machine when the Re is at least 12%

12. Due to the higher risk of Preferred Stock vis-a-vis Debt, preferred stock investors typically want higher yield and will provide a lower amount of capital.