Finance Final Exam - Practice Exam Questions

The cost of preferred stock is computed the same as the __________ A. pre-tax cost of debt. B. rate of return on an annuity. C. after-tax cost of debt. D. rate of return on a perpetuity. E. cost of an irregular growth common stock. - Rate of return on a perpetuity Which one of the following statements concerning net present value (NPV) is most CORRECT? A. An investment should be accepted if, and only if, the NPV is exactly equal to zero. B. An investment should be accepted only if the NPV is equal to the initial cash flow. C. An investment should be accepted if the NPV is positive and rejected if it is negative. D. An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted. E. Any project that has positive cash flows for every time period after the initial investment should be accepted. - An investment should be accepted if the NPV is positive and rejected if it is negative