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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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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 ...

Solution Summary

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

$2.19