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 $29,500 for 350 shares of Malti Companys common stock. She received a $326 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 $42,000. Kathy would like to earn a return of at least 16% on all of her investments. She is not sure whether the Malti Company stock provided a 16% return and would like some help with the necessary computations. (Ignore income taxes.)

Now yr1 yr2 yr3

Purchase of Stock

Annual Cash Dividend

Sale of Stock

Total cash flows

Discount Factor

Present Value

Net Present Value