Linda Clark received $$199,000$ from her mother$$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 $$116,000.$ The stock paid no dividends, but it was sold for $$210,000$ at the end of three years.

b$.$ Preferred stock was purchased at its par value of $$23,000.$ The stock paid a $6\%$ dividend $($based on par value$)$ each year for three years. At the end of three years, the stock was sold for $$22,000.$

c$.$ Bonds were purchased at a cost of $$60,000.$ The bonds paid annual interest of $$3,500.$ After three years, the bonds were sold for $$64,000.$

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 $18\%$ return, and he gave Linda the following computations to support his statement:

Common stock:

Gain on sale $($$$210,000$ $$116,000)$ $ $94,000$

Preferred stock:

Dividends paid $(6\%\backslash$times $$23,000\backslash$times $3$ years$)4,140$

Loss on sale $($$$22,000$ $$23,000)(1,000)$

Bonds:

Interest paid $($$$3,500\backslash$times $3$ years$)10,500$

Gain on sale $($$$64,000$ $$60,000)4,000$

Net gain on all investments $ $111,640$

$($$$111,640-$: $3$ years$)-$: $$199,000=18\mathrm{.}70\%$

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required:

$1-$a$.$ Using a $18\%$ discount rate, compute the net present value of each of the three investments.

$1-$b$.$ On which investment$($s$)$ did Linda earn a $18\%$ rate of return?

$2.$ Considering all three investments together, did Linda earn a $18\%$ rate of return?

$3.$ Linda wants to use the $$296,000$ proceeds $($$$210,000+$ $$22,000+$ $$64,000=$ $$296,000)$ from sale of the securities to open a retail store under a $9-$year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a $12\%$ return over the $9-$year period?