Question
Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return she is earning. For example, three
Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return she is earning. For example, three years ago she paid $22,500 for 850 shares of Malti Company's common stock. She received a cash dividend of $765 on the stock at the end of each year for three years. At the end of three years, she sold the stock for $22,000. Kathy would like to earn a return of at least 10% on all of her investments. She is not sure whether the Malti Company stock provides a 10% return and would like some help with the necessary computations. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value Kathy earned on her investment in Malti Company stock. 2. Did the Malti Company stock provide a 10% return?
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