Union local school district has bonds outstanding with a coupon rate of 3.2 percent paid semiannually and 16 years to maturity.
1 answer:
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The numerator of the return on common stockholders' equity is net income minus preferred dividends.
Option d
<u>Explanation:</u>
Return on common stockholders' equity which is also named as return on equity (ROE) ratio evaluates the accomplishment of a company in resulting income for the benefit of common stakeholders.
<em>Use of return on equity:</em>
- Isolates common equity returns
- Can be used to evaluate dividends
- Evaluates the use of capital by the management
It is calculated by income available for stockholders divided by the total number of common stock and is expressed or represented in percentage. Income available for common stockholders can be arrived by reducing preference dividends from Net income.
That is,
Hence, net income minus preferred dividends is the right answer.
Answer:
The maximum growth rate to my calculations is 8.32%, since it is closer to option E), I´d choose E) 8.37%
Explanation:
Hi, in order to find the growth rate given all the info of the problem, we need to use the following formula.
Where:
g = growth rate
b=retention ratio
R = return on equity
Since R = Earnings / Equity, and our dividend payout ratio (equals to 1 - b)our fromula changes to:
So, everything should look like this:
So, the growth rate is equal to 8.32% but this option is not available, therefore we´ll go for the closest one, that is E) 8.37%.
Best of luck.