True or False

1. Flotation costs serve to decrease the cost of preferred stock.

2. For a firm with debt, V > E.

3. The cost of retained earnings is not affected by flotation costs.

4. It is not fair to assume that preferred stocks par value will be repaid.

5. According to the subjective method, the companys current beta value should only be used for projects with average risk.

6. Generally, market values are less desirable than book values for weighing a firms funding components.

7. The market risk premium is a component of the dividend growth model.

8. For a firm selling stock for the first time, the SML model is more appropriate than the dividend growth model.

9. If the dividend is $8 and the cost of preferred stock is 18%, its price < $50.

10. If the risk-free rate = 2%, beta = 2 and the market risk premium is 10%, the cost of equity > 20%.