Answer:
A. 44.82%
B.
Option b. Return On Equity usually increases since the repurchase of shares reduces the denominator (avg. stockholders' equity)
C.
Option b. The Companies would tend to repurchase their own stock if they feel the stock is been undervalued by the market
Step-by-step explanation:
a. Computation for return on equity for 2015
Using this formula
Return on equity = The Net income amount /The Average stockholders' equity amount
Let plug in the formula
Return on equity=2,634.4/[(5,605+6,151)/2]
Return on equity=2,634.4/(11,756/2)
Return on equity=2,634.4/5,878
Return on equity=0.4482×100
Return on equity= 44.82%
b. In a situation where they repurchased over $1.4 billion of its common stock in the year 2015 this means that the RETURN ON EQUITY will usually tend to increases reason been that the repurchase of shares will often reduces the denominator (average stockholders' equity)
Therefore the repurchase increase Starbucks’ Return On Equity.
c. In a situation where Starbucks had not repurchased common stock in the year 2015, what their Return On Equity would have been is that they will repurchase their own stock if they feel the stock is been undervalued by the market
