Linda Clark received $$210,000$ from her mother$$s estate. She placed the funds into the hands of a broker, who purchased the following securities on Linda$$s behalf:

a$.$ Common stock was purchased at a cost of $$91,000.$ The stock paid no dividends, but it was sold for $$160,000$ at the end of three years.

b$.$ Preferred stock was purchased at its par value of $$46,000.$ The stock paid a $4\%$ dividend $($based on par value$)$ each year for three years. At the end of three years, the stock was sold for $$32,000.$

c$.$ Bonds were purchased at a cost of $$73,000.$ The bonds paid annual interest of $$3,500.$ After three years, the bonds were sold for $$75,000.$

The securities were all sold at the end of three years so that Linda would have funds available to open a new business venture. The broker stated that the investments had earned more than a $11\%$ return, and he gave Linda the following computations to support his statement:

Common stock:

Gain on sale $($$$160,000$ $$91,000)$ $ $69,000$

Preferred stock:

Dividends paid $(4\%\backslash$times $$46,000\backslash$times $3$ years$)5,520$

Loss on sale $($$$32,000$ $$46,000)(14,000)$

Bonds:

Interest paid $($$$3,500\backslash$times $3$ years$)10,500$

Gain on sale $($$$75,000$ $$73,000)2,000$

Net gain on all investments $ $73,020$

$($$$73,020-$: $3$ years$)-$: $$210,000=11\mathrm{.}59\%$

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

Required:

$1-$a$.$ Using a $11\%$ discount rate, compute the net present value of each of the three investments.

$1-$b$.$ On which investment$($s$)$ did Linda earn a $11\%$ rate of return?

$2.$ Considering all three investments together, did Linda earn a $11\%$ rate of return?

$3.$ Linda wants to use the $$267,000$ proceeds $($$$160,000+$ $$32,000+$ $$75,000=$ $$267,000)$ from sale of the securities to open a retail store under a $10-$year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a $8\%$ return over the $10-$year period?