Basic Net Present Value Analysis [LO1]

On January 2, Fred Critchfield paid $18,000 for 900 shares of the common stock of Acme Company.

Mr. Critchfield received an $0.80 per share dividend on the stock at the end of each year for four years. At the end of four years, he sold the stock for $22,500. Mr. Critchfield has a goal of earning a minimum return of 12% on all of his investments.

Required:

(Ignore income taxes.) Did Mr. Critchfield earn a 12% return on the stock? Use the net present value method and the general format shown in Exhibit 13–4 . Round all computations to the nearest whole dol lar.