Linda Clark received $210,000 from her mothers estate. She placed the funds into the hands of a broker, who purchased the following securities on Lindas behalf:

a.	Common stock was purchased at a cost of $102,000. The stock paid no dividends, but it was sold for $195,000 at the end of three years.
b.	Preferred stock was purchased at its par value of $43,000. 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 $29,000.
c.	Bonds were purchased at a cost of $70,000. The bonds paid annual interest of $3,500. After three years, the bonds were sold for $98,000.

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 19% return, and he gave Linda the following computations to support his statement:

Common stock:
Gain on sale ($195,000 $102,000)	$	93,000
Preferred stock:
Dividends paid (6% $43,000 3 years)		7,740
Loss on sale ($29,000 $43,000)		(14,000)
Bonds:
Interest paid ($3,500 3 years)		10,500
Gain on sale ($98,000 $70,000)		28,000
Net gain on all investments	$	125,240

	$125,240 3 years	= 19.9%
	$210,000

Required:
1-a.	Using a 19% discount rate, compute the net present value of each of the three investments. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

Item

Now

1

2

3

Common stock:

Purchase of the stock

Sale of the stock

Total cash flows

Discount factor

Present value

Net present value

Preferred stock:

Purchase of the stock

Annual cash dividend

Sale of the stock

Total cash flows

Discount factor

Present value

Net present value

Bonds:

Purchase of the bonds

Annual interest income

Sale of the bonds

Total cash flows

Discount factor

Present value

Net present value

sheet is drawn here

On which investment(s) did Linda earn a 19% rate of return? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Common stock
	Bonds
	Preferred stock