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The Balance Sheets At The End Of Each Of The First Two Years Of Operations Indicate The Following:

Year 2 Year 1 Total current assets $530,000 $460,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of parÑcommon stock 60,000 60,000 Retained earnings 330,000 210,000 If net income is $158,100 and interest expense is $30,000 for Year 2, what is the rate earned on stockholders' equity for Year 2? (Round percentage to one decimal point.) a. 20.2% b. 17.0% c. 16.0% d. 24.0%
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b. 17.0% Feedback: Rate earned on stockholders' equity = net income / average stockholders' equity. Rate earned on stockholders' equity = $158,100 / {[($600,000 + $60,000 + $330,000) + ($600,000 + $60,000 + $210,000) / 2]}. Rate earned on stockholders' equity = $158,100 / $930,000 = 17.0%.
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