On January 2, 20X7, Brian Rein invested $10,000 in the stock market and purchased 500 shares of Heartland Development, Inc. Heartland paid cash dividends of $2.70 per share in 20X7 and 20X8; the dividend was raised to $3.30 per share in 20X9. On December 31, 20X9, Rein sold his holdings and generated proceeds of $13,100. Rein 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: Rein is entitled to the 20X9 dividend.
b. Compute the investment's net present value, rounding calculations to the nearest dollar.
c. Given the results of part (b), should Rein have acquired the Heartland stock? Briefly explain.