Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of

Question:

Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $13,000 for 200 shares of Malti Company’s common stock. She received a $420 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $16,000. Kathy would like to earn a return of at least 14% on all of her investments. She is not sure whether the Malti Company stock provided a 14% return and would like some help with the necessary computations.

Required:

Ignore income taxes.) Using the net present value method, determine whether or not the Malti Company stock provided a 14% return. Use the general format illustrated in Exhibit 14--4 and round all computations to the nearest whole dollar.

Net Present Value
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