1. Annuity payments are generally assumed to occur:

A) during the period
B) at the beginning of the period
C) at the end of the period
D) it doesn't matter when they occur



2. The valuation of a financial asset is based on determining:

A) the present value of future cash flows
B) the current yield to maturity on long term corporate bonds
C) the capital budgeting process
D) what the corporation is paying to attract preferred shareholders



3. To determine the price of preferred stock:

A) divide the rate of return by the dividend amount
B) divide the dividend amount by the rate of return
C) divide the dividend amount by the rate of return minus the growth rate
D) divide the dividend amount by the growth rate



4. The cost of retained earnings is equal to:

A) the return on new common stock
B) the return on preferred stock
C) the return on existing common stock
D) It does not have a cost.



5. All of the following are true of capital cost allowance except:

A) it is a non-cash expense
B) it is not tax-deductible
C) it provides tax shield benefits
D) it should not be disregarded in capital budgeting decisions