On December 31, Mercury Corporation has the following data available: Net Income $200,000 Interest expense 20,000 Preferred dividends 20,000 Total assets at the beginning of the year 850,000 Total assets at the end of the year 780,000 Total common stockholders' equity at the beginning of the year 550,000 Total common stockholders' equity at the end of the year 490,000 What is return on common equity? A 42.31%B 38.46%C 22.09%D 34.62%

Question

Messiah Chaney

Business

29 January, 00:40

On December 31, Mercury Corporation has the following data available: Net Income $200,000 Interest expense 20,000 Preferred dividends 20,000 Total assets at the beginning of the year 850,000 Total assets at the end of the year 780,000 Total common stockholders' equity at the beginning of the year 550,000 Total common stockholders' equity at the end of the year 490,000 What is return on common equity? A 42.31%B 38.46%C 22.09%D 34.62%

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Answers (1)

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Shaniya Lloyd · Answer 1

D 34.62%

Explanation:

To get the return on commonequity we need to follow a few steps as follows:

Here we have to let the Average total common stockholders' equity = ($550,000 + $490,000) : 2 = $520,000 and (Net income $200,000 - Preferred Dividends $20,000) : Average total common stockholders' equity = 34.62%. Therefore the correct answer is 34.62%.