On January 2, Fred Critchfield paid $18,000 for 900 shares of the common stock o
ID: 2374192 • Letter: O
Question
On January 2, Fred Critchfield paid $18,000 for 900 shares of the common stock of Acme Company. Mr. Critchfield received an $0.80 per share dividend on the stock at the end of each year for four years. At the end of four years, he sold the stock for $22,500. Mr. Critchfield has a goal of earning a minimum return of 12% on all of his investments. (Ignore income taxes.)
Determine the net present value. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Explanation / Answer
NPV=-18000 -+ ( 0.8 / .12 *(1-1/1.12^4) + 22500 /1.12^5 = -3698.41
b) no
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