On January 2, Fred Critchfield paid $14,000 for 880 shares of the common stock o
ID: 2381569 • Letter: O
Question
On January 2, Fred Critchfield paid $14,000 for 880 shares of the common stock of Acme Company. Mr. Critchfield received an $0.74 per share dividend on the stock at the end of each year for seven years. At the end of seven years, he sold the stock for $22,000. Mr. Critchfield has a goal of earning a minimum return of 15% 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, other intermediate calculations and final answer to the nearest whole dollar.)
On January 2, Fred Critchfield paid $14,000 for 880 shares of the common stock of Acme Company. Mr. Critchfield received an $0.74 per share dividend on the stock at the end of each year for seven years. At the end of seven years, he sold the stock for $22,000. Mr. Critchfield has a goal of earning a minimum return of 15% on all of his investments. (Ignore income taxes.)
On January 2, Fred Critchfield paid $14,000 for 880 shares of the common stock of Acme Company. Mr. Critchfield received an $0.74 per share dividend on the stock at the end of each year for seven years. At the end of seven years, he sold the stock for $22,000. Mr. Critchfield has a goal of earning a minimum return of 15% 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, other intermediate calculations and final answer to the nearest whole dollar.)Explanation / Answer
1) $340 year; npv = 340/1.16 + 340/1.16^2 + 340/1.16^3 = $763.60
2) 11000/1.16^3 = 7047.23
Total = $7810.83.
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