Wildhorse Co. had net income of $175240 and paid dividends of $40000 to common stockholders and...

Wildhorse Co. had net income of $175240 and paid dividends of $40000 to common stockholders and $19000 to preferred stockholders in 2020. Wildhorse Co.’s common stockholders’ equity at the beginning and end of 2020 was $862000 and $1370000, respectively. Wildhorse Co.’s return on common stockholders’ equity was

11.00%.

14.00%.

10.00%.

16.00%.

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Expert Solution

Correct Option B i.e. 14%

Return on Equity = Net Income to common stockholder/ Average Equity
= 156240 / 1116000
14.00%


Net Income to common stockholder

Net Income	175,240
Less: Dividend to preference stockholder	(19,000)

Net Income to common stockholder	156,240


Average Equity =( Beginning Equity + Ending Equity )/2
=(862000 + 1370000)/2
1,116,000

ekkarill92 answered 1 year ago

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