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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
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: $ 105,000 Common stock: Gain on sale ($255,000 - $150,000) Preferred stock: Dividends paid (8% * $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 12,000 (32,000) 6,000 15,000 $ 106,000 $106,000 : 3 years - $265,000 = 13.30% 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? 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 Reg 1B Req 2 Reg 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? (Round your answer to the nearest whole dollar.) Minimum annual net cash inflow
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