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 di least 14% on all of hu investments. She is not sure whether the Malti Company stock provided a 14% return and would like some help with the necessary computations.
Required:
(Ignore income taxes.) Using the net present value method, determine whether or not the Malti Company stock provided a 14% return. Use the general format illustrated in Exhibit 12-2 and round all computations to the nearest whole dollar.