1. What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 8% of par, and a current market price of (a) $68.00, (b) $88.00, (c) $120.00, and (d) $142.00? Round your answers to two decimal places.
2. A firm is evaluating a product. The market demand for the product can be low or high.
The product requires an investment of $1,500.
If the market demand is low, then there is a 75% chance that the product will sell for $1000 and a 25% chance it will sell for $1,500.
What is the NPV of the project if the market demand is low?