Exercise $14-10($Algo$)$ Net Present Value Analysis $[$LO$14-2]$

$5$

points

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 $$33,000$ for $880$ shares of Malti Company's common stock. She received a cash dividend of $$818$ on the stock at the end of each year for three years. At the end of three years, she sold the stock for $$32,000.$ Kathy would like to earn a return of at least $7\%$ on all of her investments. She is not sure whether the Malti Company stock provides a $7\%$ return and would like some help with the necessary computations.

Click here to view Exhibit $148-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required:

Compute the net present value Kathy earned on her investment in Malti Company stock.

Did the Malti Company stock provide a $7\%$ return?