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Basic Net Present Value Analysis

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On January 2, Fred Critchfield paid $18,000 for 900 shares of the common stock of Acme Company. Mr. Critchfield received an $0.80 per share dividend on the stock at the end of each year for four years. At the end of four years , he sold the stock for $22,500. Mr. Critchfield has a goal of earning a minimum return of 12% on all of his investments.

Required:
(Ignore income taxes.) Did Mr. Critchfield earn a 12% return on the stock? Use the net present value method. Round all computations to the nearest whole dollar.

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Basic net present value analysis is given for Acme Company. The return on the stock is given.

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On January 2, Fred Critchfield paid $18,000 for 900 shares of the common stock of Acme Company. Mr. Critchfield received an $0.80 per share dividend on the stock at the end of each ...

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Manal Elkhoshkhany, MBA
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  • MBA, California State University, Sacramento
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