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##### Acct 225, Managerial Accounting

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Question;Assignment 11-3, Week 11 ProblemsAcct 225, Managerial Accounting: Acct 225,Summer 2014, Managerial Accounting,Online 1Assignment 11-3, Week 11 Problems3.Jamell Davisinstructions | helpvalue:13.00 pointsAnita Vasquez received $210,000 from her mother?s estate. She placed the funds into the hands of abroker, who purchased the following securities on Anita?s behalf:a. Common stock was purchased at a cost of $105,000. The stock paid no dividends, but it was sold for$230,000 at the end of four years.b. Preferred stock was purchased at its par value of $15,000. The stock paid a 10% dividend (based on parvalue) each year for four years. At the end of four years, the stock was sold for $10,000.c. Bonds were purchased at a cost of $90,000. The bonds paid $5,400 in interest every six months. Afterfour years, the bonds were sold for $92,000. (Note: In discounting a cash flow that occurs semiannually,the procedure is to halve the discount rate and double the number of periods. Use the same procedurein discounting the proceeds from the sale.) (Ignore income taxes.)The securities were all sold at the end of four years so that Anita would have funds available to start a newbusiness venture. The broker stated that the investments had earned more than a 20% return, and he gaveAnita the following computation to support his statement:Common stock:Gain on sale ($230,000 ? $105,000)Preferred stock:Dividends paid (10% ? $15,000 ? 4 years)Loss on sale ($10,000 ? $15,000)Bonds:Interest paid ($5,400 ? 8 periods)Gain on sale ($92,000 ? $90,000)Net gain on all investments$ 125,0006,000(5,000)43,2002,000$ 171,200$171,200 ? 4 years$210,000= 20.4%Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.Required:1a. Using a 20% discount rate, compute the net present value of each of the three investments. (Negativeamounts should be indicated by a minus sign. Round discount factor(s) to 3 decimal places,other intermediate calculations and final answers to the nearest whole dollar.)Net Present Value$Common stockPreferred stock$Bonds$1b. On which investment did Anita earn a 20% rate of return?Common stockPreferred stockBondsNone2. Considering all three investments together, did Anita earn a 20% rate of return?YesNo3. Anita wants to use the $332,000 proceeds ($230,000 + $10,000 + $92,000 = $332,000) from sale of thesecurities to open a fast-food franchise under a 10-year contract. What net annual cash inflow must thestore generate for Anita to earn a 16% return over the 10-year period? Assume that the project will yieldsame annual cash inflow each year. Anita will not receive back her original investment at the end of thecontract. (Round discount factor(s) to 3 decimal places, other intermediate calculations andfinal answer to the nearest whole dollar.)Annual net cash inflowhttp://ezto.mheducation.com/hm.tpx$1/27/24/2014Assignment 11-3, Week 11 Problemsreferencesebook & resources?2014 McGraw -Hill Education. All rights reserv ed.http://ezto.mheducation.com/hm.tpx

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