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Information posted in first picture one is to be used to answer all remaining questions! Thank you! years. Linda Clark received $245,000 from her
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Information posted in first picture one is to be used to answer all remaining questions! Thank you!
years. Linda Clark received $245,000 from her mother's estate. She placed the funds into the hands of a broker, who purchased the following securities on Linda's behalf: a. Common stock was purchased at a cost of $130,000. The stock paid no dividends, but it was sold for $220,000 at the end of three 6. Preferred stock was purchased at its par value of $44,000. The stock paid a 6% dividend (based on par value) each year for three years. At the end of three years, the stock was sold for $30,000. C. Bonds were purchased at a cost of $71,000. The bonds paid annual interest of $3,500. After three years, the bonds were sold for $73,000. The securities were all sold at the end of three years so that Linda would have funds available to open a new business venture. The broker stated that the investments had earned more than a 13% return, and he gave Linda the following computations to support his statement: $ 90,000 Common stock: Gain on sale ($220,000 - $130,000) Preferred stock. Dividends paid (68 * $ 44,000 * 3 years) Loss on sale ($30,000 - $44,000) Bonds: Interest paid ($3,500 * 3 years) Gain on sale ($73,000 - $71,000) Net gain on all investments 7,920 (14,000) 10,500 2,000 $ 96,420 $96,420 - 3 years $245,000 - 13.100 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Using a 13% discount rate, compute the net present value of each of the three investments. 1-b. On which investment(s) did Linda earn a 13% rate of return? 2. Considering all three investments together, did Linda earn a 13% rate of return? 3. Linda wants to use the $323,000 proceeds ($220,000 + $30,000 + $73,000 = $323,000) from sale of the securities to open a retail store under a 8-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 11% return over the 8-year period? Req IA Reg 1B Reg 2 Req3 Using a 13% discount rate, compute the net present value of each of the three investments. (Enter negative amounts with a minus sign. Round computations to the nearest whole dollar.) Net Present Value Common stock Preferred stock Bonds Req IA Reg 1B Reg 2 Reg 3 On which investment(s) did Linda earn a 13% rate of return? (Select all that apply.) Common Stock Bonds Preferred Stock Reg 1A Reg 1B Reg 2 Reg 3 Considering all three investments together, did Linda earn a 13% rate of return? Yes NO Reg 1A Reg 1B Reg 2 Req3 Linda wants to use the $323,000 proceeds ($220,000 + $30,000 + $73,000 = $323,000) from sale of the securities to open a retail store under a 8-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 11% return over the 8-year period? (Round your answer to the nearest whole dollar.) Minimum annual net cash inflow Req IA Reg 1B Reg 2 Reg 3 On which investment(s) did Linda earn a 13% rate of return? (Select all that apply.) Common Stock Bonds Preferred Stock Reg 1A Reg 1B Reg 2 Reg 3 Considering all three investments together, did Linda earn a 13% rate of return? Yes NO Reg 1A Reg 1B Reg 2 Req3 Linda wants to use the $323,000 proceeds ($220,000 + $30,000 + $73,000 = $323,000) from sale of the securities to open a retail store under a 8-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 11% return over the 8-year period? (Round your answer to the nearest whole dollar.) Minimum annual net cash inflowStep by Step Solution
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