True of False? Why? 1) A project’s cost of capital is what the organization shou

Question

True of False? Why?

1) A project’s cost of capital is what the organization should earn from the project and the project’s internal rate of return is what the organization can expect to earn from the project.

2) An IOS chart should be arranged by return on investment alternatives

3) When converting from a bond to a stock security, the bondholder must consider not only the conversion ratio, but also the interest payments and dividend payments of the respective investments.

4) The prospectus for stock and a bonds covenant agreement are legal documents which describe certain parameters or obligations of the company to holders.

Explanation / Answer

1. True as cost is required return and IRR is expected return

2. True...arranged from highest to lowest return

3. False

4. False..Indentures

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