1. Kindzi Co. has preferred stock outstanding that is expected to pay an annual dividend of $3.90 every year in perpetuity. If the required return is 3.99 percent, what is the current stock price?
2. It is often said that the market rewards only systematic risk with higher expected returns. Why is it so? Why is the unsystematic risk not considered in estimating expected returns?
3. When using discounted cash flow analysis to value a project, explain why it is important to measure the risk of the project and associate an expected return with that risk measure.