Answer:
Return on stockholder equity = 11.2%
Explanation:
Average Stockholder equity
2006 2005
Deferred 9% stock 100,000 100,000
Common stock 600,000 600,000
Paid in capital - 60,000 60,000
Common stock
Deferred earnings <u>325,000</u> <u>210,000</u>
Stockholder equity $1,085,000 $970,000
Average stockholder equity = $1,085,000 + $970,000 / 2
Average stockholder equity = $1,027,500
Return on stockholder equity = Net Income / Average stockholder equity
Return on stockholder equity = $115,000 / $1,027,500
Return on stockholder equity = 0.11192
Return on stockholder equity = 11.192%
Return on stockholder equity = 11.2%
