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Question
Use this information for Kellman Company to answer the questions that follow.
The balance sheets at the end of each of the first 2 years of operations indicate the following:
| Kellman Company | ||
| Year 2 | Year 1 | |
| Total current assets | $600,000 | $560,000 |
| Total investments | 60,000 | 40,000 |
| Total property, plant, and equipment | 900,000 | 700,000 |
| Total current liabilities | 125,000 | 65,000 |
| Total long-term liabilities | 350,000 | 250,000 |
| Preferred 9% stock, $100 par | 100,000 | 100,000 |
| Common stock, $10 par | 600,000 | 600,000 |
| Paid-in capital in excess of par—common stock | 75,000 | 75,000 |
| Retained earnings | 310,000 | 210,000 |
Using the balance sheets for Kellman Company, if net income is $150,000 and interest expense is $20,000 for Year 2, what is the return on stockholders' equity for Year 2 (rounded to two decimal places)?
a. 6.9%
b. 14.49%
c. 16.04%
d. 13.80%
Answer
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