Please claify this, I do NOT want the answer to the problem.
Here is the information:
On January 2, 19X1, 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 19X1 and 19X2; the dividend was raised to $3.10 per share in 19X3. On December 31, 19X3, 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 19X3 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
At first I thought there were two separate problems: the 10,000 as a stand alone investment, but after reading it over and over, I have concluded that the $10,000 was used to purchase the 500 shares.
My question is: Am I correct in assuming that the $10,000 was indeed used to purchase the 500 shares, or do I need to find the amount used to purchase the shares by using the 16% return or the $13,000 proceeds?
Any help in understanding this problem would be great. I know the math, but am TERRIBLE at word problems!
