Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 $24,500 for 950 shares of Malti Company's common stock. She received a $893 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 $31,000. 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.) 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.) Answer is complete but not entirely correct Now 1 2 3 Purchase of stock Annual cash dividend Sale of stock Total cash flows Discount factor Present value Net present value 0 893 31,000 31,893 0.641 20,443 893X $ 0 0 0 893$ 893$ 893$ 0.000X 0.862 0.743 770$ $ 21,877
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started