ADDITIONAL INFORMATION:

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 $28,000 for 400 shares of Malti Company's common stock. She received a $284 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 $25,000. Kathy would like to earn a return of at least 6% on all of her investments. She is not sure whether the Malti Company stock provided a 6% return and would like some help with the necessary computations. (Ignore income taxes) Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: a. Determine the net present value. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s) and round your Present Value final answers to the nearest whole dollar.) Now 2 Purchase of stock Annual cash dividend Sale of stock Total cash flows Discount factor Present value Net present value b. Did Kathy Myers earn 6% return on her investment? O Yes O No EXHIBIT 11B-1 Present Value of $1; Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0,451 0.437 0.423 0.410 5 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328