Exercise 13-10 Basic Net Present Value Analysis [LO13-2]

Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $16,000 for 300 shares of Malti Companys common stock. She received a $228 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $22,000. Kathy would like to earn a return of at least 16% on all of her investments. She is not sure whether the Malti Company stock provided a 16% return and would like some help with the necessary computations. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

a.	Determine the net present value. (Round your answer to the nearest whole dollar.)

b.

Did Kathy Myers earn 16% return on her investment?

	Yes
	No