E15.20 (LO 4) (Trading on the Equity Analysis) Presented below is information from the annual report of Emporia Plastics, Inc.

Operating income		$532,150
Bond interest expense		135,000
		397,150
Income taxes		183,432
Net income		$213,718
Bonds payable		$1,000,000
Common stock		875,000
Retained earnings		375,000

Instructions

a. Compute the return on common stockholders equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.)

b. Is Emporia Plastics, Inc. trading on the equity successfully? Explain.