The Balance Sheets at the End of Each of the First

question 73

Multiple Choice

The balance sheets at the end of each of the first two years of operations indicate the following: $\begin{array}{|l|l|l|}\hline2012&2013\\\hline\$ 560,000 & \$ 600,000 & \text { Total current assets } \\\hline 40,000 & 60,000 & \text { Total investments } \\\hline 700,000 & 900,000 & \text { Total property, plant, and ecuipment } \\\hline 80,000 & 125,000 & \text { Total current liabilities } \\\hline 250,000 & 350,000 & \text { Total long-term liabilities } \\\hline 100,000 & 100,000 & \text { Preferred } 9 \% \text { stock } \$ 100 \mathrm{prr} \\\hline 600,000 & 600,000 & \text { Common stock, } \$ 10 \text { prr } \\\hline 60,000 & 60,000 & \text { Paid-in capital in excess of par--common stock } \\\hline 210,000 & 325,000 & \text { Retained earnings }\\\hline\end{array}$

Based on the above information, if net income is $130,000 and interest expense is $40,000 for 2013, what is the rate earned on common stockholders' equity for 2013 (round to one decimal place) ?

• A) 12.3%
• B) 14.0%
• C) 13.0%
• D) 17.4%

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price in a market.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers over a range of prices.

Equilibrium Price

The cost where the amount of products offered matches the amount of products sought by consumers.