Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate...

 

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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 $22,500 for 850 shares of Malti Company's common stock. She received a cash dividend of $765 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 10% on all of her investments. She is not sure whether the Malti Company stock provides a 10% return and would like some help with the necessary computations. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value Kathy earned on her investment in Malti Company stock. 2. Did the Malti Company stock provide a 10% return? 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 $22,500 for 850 shares of Malti Company's common stock. She received a cash dividend of $765 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 10% on all of her investments. She is not sure whether the Malti Company stock provides a 10% return and would like some help with the necessary computations. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value Kathy earned on her investment in Malti Company stock. 2. Did the Malti Company stock provide a 10% return?