Question

Holland? Corporation's annual report is as follows. March? 31, 2016 March? 31, 2017 Net Income ?$350,000 ?$441,500 Preferred Dividends 0 0 Total? Stockholders' Equity ?$4,380,000 ?$5,092,000 ?Stockholders' Equity attributable to Preferred Stock 0 0 Number of Common Shares Outstanding ?284,000 ?195,000 Based on the information? provided, find the rate of return on common? stockholders' equity on March? 31, 2017. ?(Round your final answer two decimal? places.)

Answer 1

To find the rate of return on common, use the given formula. CAGR = (EV/BV) 1/n -1
Where CAGR is the compounded annual growth rate, EV is the investment's ending value, BV is the investment's beginning value and n is the years.

Given
BV= $350,000 ; EV= $441,500, n= 1 year

Solution

CAGR =[ ($441,500 / $350,000) 1/1 ]-1
           = [(1.26) 1] - 1
           = 1.26 - 1
           = 0.26 X 100
           = 26%

So the rate return on common is 26%