The Shareholder's Equity Section of Killam Company Contains the Following

question 2

Multiple Choice

The shareholder's equity section of Killam Company contains the following accounts and amounts: $$\begin{array}{l}\begin{array} { l r } \text { Preferred shares } ^ { 1 } , 50,000 \text { outstanding } & \$ 1,250,000 \\\text { Common shares } ^ { 2 } , 1,000,000 \text { outstanding } & \$ 2,500,000 \\\text { Retained earnings } & \$ 3,500,000 \\\text { Net income } & \$ 875,000\end{array}\\{ } ^ { 1 } \$ 100,000 \text { dividends paid; } { } ^ { 2 } \$ 500,000 \text { dividends paid }\end{array}$$ What was Killam's return on equity closest too?

• A)10.6%
• B)12.0%
• C)12.9%
• D)14.5%