Solution 1:
Computation of NPV | ||||
Particulars | Period | PV Factor | Amount | Present Value |
Cash outflows: | ||||
Initial investment | 0 | 1 | $25,000 | $25,000 |
Present Value of Cash outflows (A) | $25,000 | |||
Cash Inflows | ||||
Year 1 | 1 | 0.88496 | $1,032 | $913 |
Year 2 | 2 | 0.78315 | $1,032 | $808 |
Year 3 | 3 | 0.69305 | $25,032 | $17,348 |
Present Value of Cash Inflows (B) | $19,070 | |||
Net Present Value (NPV) (B-A) | -$5,930 |
Solution 2:
As NPV is negative, it means Malti company should did not provided 13% return.
Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate...
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 $21,000 for 950 shares of Malti Company's common stock. She received a $770 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 $24,000. Kathy would like to earn a return of at least 9% on...
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 $24,000 for 980 shares of Malti Company’s common stock. She received a $823 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 10% on...
IB- 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 $13,000 for 200 shares of Malti Company's common stock. She received a $420 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 $16,000. Kathy would like to earn a return of at least 14%...
1B- 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 $13,000 for 200 shares of Malti Company's common stock. She received a $420 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 $16,000. Kathy would like to earn a return of at least 14%...
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 $24,000 for 980 shares of Malti Company's common stock. She received a $823 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 10% on...
EXERCISE 13-10 Basic Net Present Value Analysis (L013-2] 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 $13,000 for 200 shares of Malti Company's common stock. She received a $420 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 $16,000. Kathy would like to...
5. Based on the data if Kathy tells her grandchildren how she found bones in her yard the 1948 with only 99.89% of carbon- 14 inside of them. How old would the bones be in today? 6. Susan wants to sale her chemicals to the public health association. She states that her chemicals can reduce a radio-active substance from 12g initially down to 6g four years later. The president of the association asked her to prove her findings by telling...
Linda Clark received $225,000 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 $96,000. The stock paid no dividends, but it was sold for $165,000 at the end of three years b. Preferred stock was purchased at its par value of $51,000. The stock paid a 4% dividend (based on par value) each year for three years. At...
Linda Clark received $223,000 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 $99,000. The stock paid no dividends, but it was sold for $161,000 at the end of three years. b. Preferred stock was purchased at its par value of $54,000. The stock paid a 6% dividend (based on par value) each year for three years. At...
Jessica Nekton received $170,000 from her mother's estate. She placed the funds into the hands of a broker, who purchased the following securities on Ms. Nekton's behalf: a cost of $85,000. The stock paid no dividends, but it was sold for a. Common stock was purchased $170.000 at the end of four years. b. Preferred stock was purchased at its par value of $39,000. The stock paid a 9% dividend (based on par value) each year for four years. At...