On January 2, 20x1, Jennifer Grey purchased 800 shares of Sounder Telecommunications common stock at $35 per share. The company paid a $1.50 dividend per share on December 28 of that year, and raised the amount by $0.50 per share for a distribution on December 28, 20x2. Jennifer sold her entire investment on December 30, 20x2, generating a $5,000 gain on the sale of stock.YearFV of $1 at 10%FV of an ordinary annuity at 10% PV of $1 at 10%PV of an ordinary annuity at 10% 11.1001.0000.9090.90921.2102.1000.8261.73631.3313.3100.7512.48741.4644.6410.6833.17051.6116.1050.6213.79161.7727.7160.5644.355Required:A. Prepare a dated listing of the cash inflows and outflows related to Jennifer's stock investment. Ignore income taxes.B. Assume that Jennifer has a 10% hurdle rate for all investments.
Rounding to the nearest dollar, compute the net present value of her investment in Sounder and determine whether she achieved her 10% goal.
What will be an ideal response?
A.
| January 2, 20x1 | Purchase (800 shares × $35) | $(28,000) |
| December 28, 20x1 | Dividend (800 shares × $1.50) | 1,200 |
| December 28, 20x2 | Dividend (800 shares × $2.00) | 1,600 |
| December 30, 20x2 | Sale ($28,000 + $5,000) | 33,000 |
| Purchase of shares | $(28,000) × 1.0 | $(28,000) |
| Dividend, 20x1 | $1,200 × 0.909 | 1,091 |
| Dividend, 20x2 | $1,600 × 0.826 | 1,322 |
| Sale of shares | $33,000 × 0.826 | 27,258 |
| Total | ? | $1,671 |
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