Answer the following questions using the information presented in class and available in the textbook.Each answer is to be hand written/calculated, but you may use Excel to check your answers.

When completing the exam, each answer shall include the following:

a.A statement identifying the engineering economics method and decision criteria used in determining the answer

b.Cash Flow Diagrams for each component of the question/answer

c.The formula(s) used for each calculation - e.g., P = F / (1 + i)^N (after the set of formulas for each problem have been identified, "interest factors" can be used to simplify the calculations and avoid errors)

d.A proper statement defining the use of the factors found in Appendix B "Interest Factors for Discrete Compounding" - e.g., Present Worth of a Future Amount at 8% annually for 25 years should be written as: "(P/F, 8%, 25) = 0.1460" prior to its use in a calculation

e.A concluding statement answering the ultimate question

Note:Points will be awarded for each answer element "a" through "e".

QUESTION

On March 13, 1986, Microsoft issued over 3 million shares at an issue price of $21 per share.By doing so, it raised $61 million during its Initial Public Offering (I.P.O.).Now, its market capitalization exceeds $1.94 trillion and its stock recently closed at approximately $260 per share.Since going public, Microsoft stock has split nine (9) times and began paying a dividend in 2003.The specifics of each split and annual dividend are identified below:

Stock SplitsDividend Schedule2012$0.83 per share 09/19872:1.2003$0.24 per share2013$0.97 per share

04/19902:1 2004$3.16 per share 2014$1.15 per share

06/19913:2 2005$0.32 per share 2015$1.29 per share

06/19923:2 2006$0.28 per share 2016$1.47 per share

05/19942:1 2007$0.14 per share 2017$1.56 per share

12/19962:1 2008$0.24 per share 2018$1.68 per share

02/19982:1 2009$0.52 per share 2019$1.84 per share

03/19992:1 2010$0.55 per share 2020$2.04 per share

02/20032:1 2011$0.68 per share 2021$2.24 per share

Note about Stock Splits:That is, two shares in exchange for one share as represented by the nomenclature 2:1 and three shares in exchange for two shares as represented by 3:2.

During this period, the 30-year U.S. Treasury Bill interest rate averaged approximately 6%.

Considering all years as full years, and that dividends paid are a part of the return of a stock, determine the TOTAL PROJECTED Rate of Return for a 100 share investment in Microsoft at the hypothetical sale/disposal of all shares at the end of 2021.