Basic Net Present Value Analysis
Kathy Myers frequently purchases stocks and bond, but she is uncertain how to detemine he rate of return on what she is earning. 3 years ago she paid 13000 for 200 shares of Malti Companies Stock. She received 420$ cash divided on the stock at the end of each year for 3 years. At the end of 3 years she sold the stock for 16000. Kathy would like to earn a return rate of at least 14% on all of her investments. She is not sure whether the Malti Company stock provided a 14% return and would like help with the necessary computations.
Ignore income taxes:
1) Using the net present value method, determine whether or not the Malti Company stock provided a 14% return. Use the general format and round all computations to the nearest whole dollar.
See attached file for formulas and better formatting.
Although the return in dollars looks good, the present value of the cash flow stream over the four years is only $10,269.77. I ...
Computations and process shown for you.