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 $27,000 for 1,010 shares of Malti Company's common stock. She received a $879 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 $25,000. 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 provide a 7% return and would like some help with the necessary computations. Required: Compute the net present value that Kathy earned on her investment in Malti Company stock. Did the Malti Company stock provide a 7% return?
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 $27,000 for 1,010 shares of Malti Company's common stock. She received a $879 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 $25,000. 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 provide a 7% return and would like some help with the necessary computations. Required: Compute the net present value that Kathy earned on her investment in Malti Company stock. Did the Malti Company stock provide a 7% return?
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 66P
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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 $27,000 for 1,010 shares of Malti Company's common stock. She received a $879 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 $25,000. 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 provide a 7% return and would like some help with the necessary computations. Required: Compute the net present value that Kathy earned on her investment in Malti Company stock. Did the Malti Company stock provide a 7% return?
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