Linda Clark received $219,000 from her mother's estate. She placed the funds into the hands...

90.2K

Verified Solution

Question

Accounting

image Linda Clark received $219,000 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 pald no dlvidends, but it was sold for $170,000 at the end of three years. b. Preferred stock was purchased at its par value of $48,000. The stock paid a 6% dividend (based on par value) each year for three years. At the end of three years, the stock was sold for $34,000. c. Bonds were purchased at a cost of $75,000. The bonds pald annual Interest of $4,500. After three years, the bonds were sold for $77,000 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 12% return, and he gave Linda the following computatlons to support his statement: $84,1403 years /$219,000=12.80% Cllck here to vlew , to determine the approprlate discount factor(s) using tables. Required: 1-a. Using a 12% discount rate, compute the net present value of each of the three investments. 1-b. On which Investment(s) dld Linda earn a 12% rate of return? 2. Considering all three investments together, did Linda earn a 12% rate of return? 3. Linda wants to use the $281,000 proceeds $170,000+$34,000+$77,000=$281,000) from sale of the securities to open a retail store under a 12-year franchise contract. What minlmum annual net cash Inflow must the store generate for LInda to earn a 10% return over the 12-year period? Complete this question by entering your answers in the tabs below. Using a 12% discount rate, compute the net present value of each of the three investments. (Enter negative amounts with a minus sign. Round computations to the nearest whole dollar.) On which investment(s) did Linda earn a 12% rate of return? (You may select more than one answer.) Considering all three Investments together, did Linda earn a 12% rate of return? Linda wants to use the $281,000 proceeds ($170,000+$34,000+$77,000=$281,000) from sale of the securities to open a retail store under a 12-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 10% return over the 12 -year period? (Round your answer to the nearest whole dollar.) Linda Clark received $219,000 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 pald no dlvidends, but it was sold for $170,000 at the end of three years. b. Preferred stock was purchased at its par value of $48,000. The stock paid a 6% dividend (based on par value) each year for three years. At the end of three years, the stock was sold for $34,000. c. Bonds were purchased at a cost of $75,000. The bonds pald annual Interest of $4,500. After three years, the bonds were sold for $77,000 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 12% return, and he gave Linda the following computatlons to support his statement: $84,1403 years /$219,000=12.80% Cllck here to vlew , to determine the approprlate discount factor(s) using tables. Required: 1-a. Using a 12% discount rate, compute the net present value of each of the three investments. 1-b. On which Investment(s) dld Linda earn a 12% rate of return? 2. Considering all three investments together, did Linda earn a 12% rate of return? 3. Linda wants to use the $281,000 proceeds $170,000+$34,000+$77,000=$281,000) from sale of the securities to open a retail store under a 12-year franchise contract. What minlmum annual net cash Inflow must the store generate for LInda to earn a 10% return over the 12-year period? Complete this question by entering your answers in the tabs below. Using a 12% discount rate, compute the net present value of each of the three investments. (Enter negative amounts with a minus sign. Round computations to the nearest whole dollar.) On which investment(s) did Linda earn a 12% rate of return? (You may select more than one answer.) Considering all three Investments together, did Linda earn a 12% rate of return? Linda wants to use the $281,000 proceeds ($170,000+$34,000+$77,000=$281,000) from sale of the securities to open a retail store under a 12-year franchise contract. What minimum annual net cash inflow must the store generate for Linda to earn a 10% return over the 12 -year period? (Round your answer to the nearest whole dollar.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students