My first Magazine ACC 206 All Assignments | Page 47

On January 2, 20X1, Bruce Greene invested $10,000 in the stock market
and purchased 500 shares of Heartland Development, Inc. Heartland
paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend
was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene
sold his holdings and generated proceeds of $13,000. Greene uses the
net-present- value method and desires a 16% return on investments.
a. Prepare a chronological list of the investment's cash flows. Note:
Greene is entitled to the 20X3 dividend.
b. Compute the investment's net present value, rounding
calculations to the nearest dollar.
c. Given the results of part (b), should Greene have acquired the
Heartland stock? Briefly explain.
Chapter 8 exercise 5:
5. Straightforwardnet present value and internal rate of return
The City of Bedford is studying a 600-acre site on Route 356 for a new
landfill. The startup cost has been calculated as follows:
Purchase cost: $450 per acre
Site preparation: $175,000
The site can be used for 20 years before it reaches capacity. Bedford,
which shares a facility in Bath Township with other municipalities,
estimates that the new location will save $40,000 in annual operating
costs.