ABC stock price was about $61 in Dec. 2011, $73 in Dec. 2012, $45 in Dec. 2013, and $57 in Dec. 2014. Its historical div

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answerhappygod
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ABC stock price was about $61 in Dec. 2011, $73 in Dec. 2012, $45 in Dec. 2013, and $57 in Dec. 2014. Its historical div

Post by answerhappygod »

ABC stock price was about $61 in Dec. 2011, $73 in Dec. 2012,
$45 in Dec. 2013, and $57 in Dec. 2014. Its historical dividend was
about $1.76 per share annually.
Let's assume you, as a stock investor, have done the following
transactions:
a) bought 5,000 shares in Dec. 2011;
b) collected the dividends ($1.76 per share) on your shares one
year later, and then sold 3,000 shares in Dec. 2012;
c) collected the dividends ($1.76 per share) on your remaining
shares one year later, and then bought another 2,000 shares in Dec.
2013;
d) collected the dividends ($1.76 per share) on your remaining
shares one year later, and then sold all your remaining shares in
Dec. 2014.
(1) What should be the IRR during your "Dec. 2011 - Dec.
2014" period for your stock investment?
(2) Pretend that the required return R for ABC stock is
known as 7% annually, what is your stock investment's NPV over the
same period?
(3) Let's assume there is no time limit requirement for you to
get the full money back, so "payback" is not an issue yet.
Per your answers in Questions (1) and (2), has your investment
been successful (in terms of NPV and IRR) during "Dec. 2011 -
Dec. 2014" ?
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