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Linda Clark received $188,000 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 $100,000. The stock paid no dividends, but it was sold for $190,000 at the end of three years. b. Preferred stock was purchased at its par value of $32,000. 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 $21,000. c. Bonds were purchased at a cost of $56,000. The bonds paid annual interest of $2,500. After three years, the bonds were sold for $60,000. 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 16% return, and he gave Linda the following computations to support his statement: Common stock Gain on sale ($190,000 $100,000) $ 90,000 Preferred stock Dividends paid (49 x $32,000 3 years) Loss on sale ($21,000$32,000) 3,840 (11,000) Bonds: 7,500 4,000 $ 94,340 Interest paid ($2,500x 3 years) Gain on sale ($60,000 $56,000) Net gain on all investments $94, 340to years - 16.70 % $188,000 Click here to view Exhibit 13B-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using tables. Required: 1a. Using a 16% discount rate, compute the net present value of each of the three investments. 1-b On which investment(s) did Linda earn a 16% rate of return? 2. Considering all three investments together, did Linda earn a 16% rate of return? 3, Linda wants to use the $271,000 proceeds ($190,000 + $21,000 + $60,000 $271,000) from sale of the securities to open a retail store under a 8-year franchise contract what minimum, annual net cash inflow must the store generate for Linda to earn a 11% return over the 8-year period

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