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Item 1

Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return she is earning. For example, three years ago she paid $25,000 for 860 shares of Malti Companys common stock. She received a cash dividend of $783 on the stock at the end of each year for three years. At the end of three years, she sold the stock for $35,000. Kathy would like to earn a return of at least 15% on all of her investments. She is not sure whether the Malti Company stock provides a 15% return and would like some help with the necessary computations.

Required:

1. Compute the net present value Kathy earned on her investment in Malti Company stock.
2. Did the Malti Company stock provide a 15% return?