At year-end 2004, Istanbul Company had stockholders equity of $18 million. Stockholders equity at year end 2004
Question:
At year-end 2004, Istanbul Company had stockholders’ equity of $18 million. Stockholders’ equity at year end 2004 consisted of one million shares of common stock. For 2004, the company reported net income of $4 million. The company paid common dividends of $2 per share in 2004. Compute Istanbul’s return on equity for 2004. What would this amount have been if the company had issued bonds at the beginning of 2004 and had used the proceeds to repurchase common stock, reducing stockholders’ equity at the end of 2004 to $14,540,000? Assume net income decreased to $3.79 million as a result of additional interest expense, and dividends per share remained at $2 per share for common stock.
Step by Step Answer:
Financial Accounting Information For Decisions
ISBN: 978-0324672701
6th Edition
Authors: Robert w Ingram, Thomas L Albright