20 The net income of a company for the year was 570000 The c

20) The net income of a company for the year was $570,000. The company has no preferred stock. Common stockholders\' equity was $1,800,000 at the beginning of the year and $2,300,000 at the end of the ear. Calculate the rate of return on common stockholders\' equity. (Round your answer to two decimal laces.) ) 24.78% ) 19.86% ) 31.67% ) 27.80%

Solution

Answer:

Rate of Return on Common Stockholders\' Equity = Net Income / Average Stockholders\' Equity * 100
Average Stockholders\' Equity = (Beginning Stockholders\' Equity + Ending Stockholders\' Equity) * 100
Average Stockholders\' Equity = ($1,800,000 + $2,300,000)/ 2
Average Stockholders\' Equity = $2,050,000

Rate of Return on Common Stockholders\' Equity = 570,000 / 2,050,000 * 100
Rate of Return on Common Stockholders\' Equity = 27.80%