The stockholders’ equity section of Winslow Design Company’s December 31, 2006 balance sheet appeared as follows:

Contributed capital

Preferred stock, $100 par (10,000 shares authorized, 1,250 shares issued) . $125,000

Additional paid-in capital on preferred stock .............. 55,000

Common stock, $10 par (60,000 shares authorized, 15,000 shares issued) ... 150,000

Additional paid-in capital on common stock .............. 105,000

Total contributed capital ...................... $435,000

Retained earnings ............................ 78,000

Contributed capital and retained earnings ............... $ 513,000

Less: Treasury stock (300 shares of common at $14 per share) ........ (4,200)

Total Stockholders’ Equity ..................... $508,800

During 2007 the company entered into the following transactions affecting stockholders’ equity:

1. Issued 250 shares of preferred stock at $164 per share.

2. Issued 3,000 shares of common stock at $17 per share.

3. Reacquired 200 of its own common shares as treasury stock for $15 per share.

4. Reissued 250 shares of treasury stock at $17 per share (FIFO basis).

5. Net income for 2007 was $46,500. Dividends of $25,000 were distributed.

Required

1. Prepare a statement of changes in stockholders’ equity for the year ended December 31, 2007.

2. Compute the return on stockholders’ equity for 2007.