Linda Clark received $265,000 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 $150,000. The stock paid no dividends, but it was sold for $255,000 at the end of three years. b. Preferred stock was purchased at its par value of $50,000. The stock paid a 8% dividend (based on par value) each year for three years. At the end of three years, the stock was sold for $18,000. c. Bonds were purchased at a cost of $65,000. The bonds paid annual interest of $2,000. After three years, the bonds were sold for $80,000. 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 13% return, and he gave Linda the following computations to support his statement: Common stock: Gain on sale ($255,000 - $150,000) Preferred stock: Dividends paid (8% x $50,000 x 3 years) Loss on sale ($18,000 $50,000) Bonds: Interest paid ($2,000 x 3 years) Gain on sale ($80,000 - $65,000) Net gain on all investments ($106,000 3 years) + $265,000 = 13.33% $ 105,000 12,000 (32,000) 6,000 15,000 $ 106,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Using a 13% discount rate, compute the net present value of each of the three investments. 1-b. On which investment(s) did Linda earn a 13% rate of return? Required: 1-a. Using a 13% discount rate, compute the net present value of each of the three investments. 1-b. On which investment(s) did Linda earn a 13% rate of return? 2. Considering all three investments together, did Linda earn a 13% rate of return? 3. Linda wants to use the $353,000 proceeds ($255,000 +$18,000+ $80,000 = $353,000) from sale of the securities to open a retail store under a 8-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 12% return over the 8-year period? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Using a 13% discount rate, compute the net present value of each of the three investments. (Enter negative amounts with a minus sign. Round computations to the nearest whole dollar.) Common stock Preferred stock Net present value Bonds On which investment(s) did Linda earn a 13% rate of return? (You may select more than one answer.) Common Stock Bonds Preferred Stock Considering all three investments together, did Linda earn a 13% rate of return? Yes No ON Linda wants to use the $353,000 proceeds ($255,000 +$18,000+ $80,000 = $353,000) from sale of the securities to open a retail store under a 8-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 12% return over the 8-year period? (Round your answer to the nearest whole dollar.) Minimum annual net cash inflow Dan EXHIBIT 12B-1 Present Value of $1; 1 (1+r)n Periods 1 4% 0.962 6% 5% 0.952 0.943 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.672 0.683 0.661 0.650 0.640 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 5 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 6 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 7 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 8 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 9 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 10 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 11 0.650 0.585 0.527 0.475 0.429 0.388 12 0.625 0.557 0.497 0.444 13 0.601 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0.333 0.255 0.196 0.150 29 0.321 0.243 30 40 0.322 0.295 0.270 0.247 0.227 0.208 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.102 0.092 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.1411 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.439 0.359 0.294 0.242 0.199 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.007 0.006 0.005 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.361 0.281 0.220 0.172 0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.624 0.609 0.593 0.579 0.467 0.451 0.534 0.516 0.482 0.572 0.499 0.552 0.370 0.437 0.419 0.456 0.402 0.386 0.497 0.476 0.370 0.352 0.335 0.319 0.303 0.390 0.432 0.410 0.263 0.249 0.296 0.354 0.279 0.376 0.333 0.314 0.327 0.305 0.249 0.233 0.285 0.266 0.284 0.263 0.243 0.225 0.191 0.564 0.551 0.537 0.524 0.512 0.423 0.437 0.355 0.289 0.275 0.410 0.341 0.328 0.262 0.235 0.222 0.210 0.218 0.204 0.191 0.179 0.168 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.176 0.162 0.149 0.137 0.148 0.135 0.123 0.124 0.112 0.126 0.107 0.116 0.112 0.103 0.094 0.086 0.083 0.076 0.061 0.068 0.069 0.055 0.055 0.049 0.044 0.045 0.040 0.035 0.036 0.032 0.028 0.014 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears; 1/r(1-(1/(1+r)^n)) Periods 1 4% 5% 0.962 0.952 2 1.886 1.859 6% 0.943 1.833 3 2.775 2.723 1.808 2.673 2.624 7% 8% 0.935 0.926 1.783 2.577 9% 0.917 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 1.713 1.690 2.444 2.402 2.361 4 3.630 3.546 5 4.452 4.329 4.212 3.465 3.387 3.312 4.100 3.993 3.240 3.890 6 5.242 7 8 6.733 5.076 6.002 5.786 5.582 6.463 4.917 4.767 4.623 4.486 4.868 4.712 4.564 1.759 1.736 2.531 2.487 2.743 3.170 3.102 3.037 2.974 2.914 2.855 2.798 3.696 3.791 3.199 3.274 3.605 3.517 3.352 3.433 4.355 4.231 4.111 3.998 3.889 3.589 3.784 4.423 1.668 1.647 1.626 1.605 1.585 1.566 1.547 2.322 2.283 2.246 3.685 4.288 5.535 5.335 5.146 4.968 4.799 4.639 9 7.435 5.995 5.759 5.537 5.328 10 8.111 6.145 11 8.760 12 9.385 13 14 15 16 17 18 12.659 11.690 10.828 10.059 9.372 8.756 19 13.134 12.085 11.158 10.336 9.604 8.950 20 21 13.590 12.462 11.470 10.594 9.818 14.029 12.821 11.764 10.836 10.017 22 23 24 9.129 9.292 14.451 13.163 | 12.042 | 11.061 10.201 9.442 14.857 13.489 12.303 11.272 10.371 9.580 15.247 13.799 12.550 11.469 10.529 9.707 25 9.077 26 27 28 29 30 40 5.389 5.206 5.033 5.747 6.210 5.971 7.108 6.802 6.515 6.247 5.132 4.946 4.772 7.024 7.722 7.360 6.418 5.650 6.710 5.426 5.216 5.889 5.019 4.833 8.306 7.887 7.499 6.805 7.139 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 8.384 8.863 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.203 4.910 4.715 4.533 4.362 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 15.622 14.094 12.783 11.654 10.675 9.823 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 15.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5,502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 4.160 4.039 3.922 2.210 2.174 2.140 2.690 2.639 3.127 3.058 3.410 3.498 3.706 3.812 2.991 3.326 20% 22% 23% 21% 24% 25% 0.833 0.826 0.820 0.813 0.806 0.800 1.528 1.509 1.474 1.492 1.440 1.457 2.074 2.106 2.042 2.011 1.981 1.952 2.540 2.494 2.448 2.404 2.362 2.589 2.864 2.803 2.745 2.926 2.689 3.245 3.167 3.092 3.020 2.951 3.605 3.508 3.416 3.327 3.242 3.161 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 4.327 4.035 4.177 3.902 3.776 3.656 3.851 3.985 3.725 3.780 4.053 3.912 4.108 3.962 3.824 4.153 4.189 4.001 3.859 4.033 3.887 Type here to search : H C 40E D