Q11.27: what is the return on common stockholders’ equity based on the following: beginning common stockholders’ equity: $10,317,000 ending common stockholders’ 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 :

13.3%

Explanation:

Given: Beginning Common Stockholders’ Equity: $10,317,000.

           Ending Common Stockholders’ Equity: $10,662,000.

            Net Income: $1,429,000

            Preferred stock: 8000 shares 6% at $75.

First, let calculate average common stockholder equity.

Average common stockholder equity=

⇒ Average common stockholder equity=

∴ Average common stockholder equity= $10489500.

Now, calculating preferred dividend.

⇒ Preferred dividend=

∴ Preferred dividend= $36000.

Next, computing return on common shareholder equity.

Return on equity=    

Return on equity=

∴ Return on equity= 13.3%

∴ Return on common stockholders´ equity is 13.3%

the earnings of a typical investor is around $1,000,000 to $10,000,000

hope this !

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