Smith Company the following information on the financial statements:Net Income$50,000Preferred Dividends8,000Average Common Stockholder's Equity180,000Average number of Common Shares Outstanding250,000sharesMarket Price$2per shareWhat is the rate of return on common stockholder's equity (to nearest percent) ?

Question

Jane Erickson

Business

22 October, 08:25

Smith Company the following information on the financial statements:Net Income$50,000Preferred Dividends8,000Average Common Stockholder's Equity180,000Average number of Common Shares Outstanding250,000sharesMarket Price$2per shareWhat is the rate of return on common stockholder's equity (to nearest percent) ?

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Answers (1)

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Haleigh Chase · Answer 1

28%

Explanation:

Now to find rate of return we just divide net income by average common stockholder's equity:

rate of return = ($50,000 / $180,000) x 100 = 27.78%

Since we are told to round to nearest percent, we must round up to 28%