Presented below is information from the annual report of Emporia Plastics, Inc.

Question

Presented below is information from the annual report of Emporia Plastics, Inc.

(a) Compute the return on common stock equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.)

Rate of return on common stock equity %

Rate of interest paid on bonds payable %

operating income 533450 bond interest expense 123161 410289 income taxes 156284 net income 254005 bonds payable 1559000 common stock 903000 retained earnings 470000

Explanation / Answer

Common stock equity = common stock + retained earnings = $ 1,373,000

Return on common stock equity = net income / common stock equity = 254,005 /1,373,000 x 100 = 18.5%

Rate of interest on bonds payable = bonds interest expense / bonds payable = 123,161 / 1,559,000 = 7.9%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.