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Return on Stockholder's Equity

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Pacific Fixtures lists the following accounts as part of its balance sheet.
Total assets \$10,000,000
Accounts payable \$ 2,000,000
Notes payable (8%) 1,000,000
Bonds (10%) 3,000,000
Common stock at par 1,000,000
Contributed capital in excess of par 500,000
Retained earnings 2,500,000
Total liabilities and stockholders' equity \$10,000,000

Compute the return on stockholders' equity if the company has sales of \$20 million
and the following net profit margin:
a. 3 percent
b. 5 percent

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Solution Preview

a) Sales = 20 million
Net profit margin = 3%
Net profit = 20*3%= 0.6 million
Stockholder's ...

Solution Summary

This solution shows how to determine return on stockholder's equity with step-by-step calculations.

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