Question

What is the return on common stockholdersâ equity based on the following: Beginning Common Stockholdersâ Equity: $10,317,000 Ending Common Stockholdersâ Equity: $10,662,000 Net Income: $1,429,000 Preferred Stock throughout the year: 6%, $75 par (8,000 shares authorized, issued, and outstanding).a:

Answer 1

Answer:

13.28%

Explanation:

return on stockholders' equity = net income after taxes and preferred stock dividends / average stockholders' equity

• net income = $1,429,000
• preferred stocks dividends = 8,000 stocks x $75 x 6% = $36,000
• average stockholders' equity = ($10,317,000 + $10,662,000) / 2 = $10,489,500

return on stockholders' equity = ($1,429,000 - $36,000) / $10,489,500 = 13.28%