Ever wondered how much your investment could grow over time? Understanding CAGR and other key financial metrics can help you unlock the true potential of your portfolio. In this guide, we'll break down Stock N's performance and show you exactly how to calculate your returns, including capital appreciation, dividends, and essential financial indicators like Net Present Value (NPV) and Internal Rate of Return (IRR).
Step 1: Tabulate Your Cash Flow
To begin, record all the investment inflows and outflows associated with Stock N over the given period.
Step 2: Sum Up All Investment Outflows
The total amount invested in Stock N is calculated as follows:
$3,224.48 + $3,224.48 + $4,646.38 + $4,377.63 = $15,472.97
Step 3: Sum Up All Holding Shares
The total number of shares accumulated:
10,000 + 10,000 + 10,000 + 24,000 + 7,500 = 61,500 shares
Step 4: Calculate the Average Cost Per Share
The average cost per share is determined by dividing the total investment by the total number of shares:
$15,472.97 / 61,500 = $0.2516 per share
Step 5: Market Price Per Share
The latest market price per share is $0.530.
Step 6: Calculate Holding Return (Appreciation)
The appreciation of the stock from 2-Sep-06 to 22-Aug-11 is calculated using:
(0.53 - 0.2516) / 0.2516 = 110.65%
Alternatively, using total market value:
(32,595 - 15,472.97) / 15,472.97 = 110.65%
Step 7: Sum Up All Received Dividends
The total dividends received over the holding period:
$290 + $386.90 + $585 + $630 + $631.80 + $891.75 + $889.25 + $889.25 + $889.25 = $6,083.20
Step 8: Calculate Holding Return (Dividend)
The return from dividends:
$6,083.20 / $15,472.97 = 39.32%
Step 9: Calculate Total Holding Return (Appreciation + Dividend)
The overall return from stock appreciation and dividends:
110.65% + 39.32% = 149.97%
Step 10: Calculate NPV and IRR
To assess the investment's financial viability:
NPV @ 15% = $7,532.12 (accepted)
IRR = 32.12% per annum
Stock N has demonstrated impressive growth over time, with a total return of 149.97% and an IRR of 32.12%. This performance outpaces many traditional investments, highlighting the importance of understanding key financial metrics when making investment decisions.
Would you like to analyze your own stock investments? Try these formulas and share your results in the comments.
