Expected return on common equity

Mitch Holtus and Stan Weber are partners in a company called Sports Voice. Greg Sharp has approached the partners about joining the company, and he wants to buy a 20 percent interest in the company. Sports Voice has $80,000 in liabilities. Holtus has a capital balance of $108,000; Weber’s capital balance is $92,000. They share profits and losses equally.

How much money will Sharp have to contribute to the company to obtain a 20 percent interest?

Rembrandt Corporation has 5,000 shares of $100 par value 8 percent cumulative preferred stock included in its total owners’ equity of $1,800,000. Its budgeted income for the period is $300,000.

If the preferred stock has a liquidating value of $400,000, what is the expected return on common equity

The board of directors of Rose Company is going to pay a dividend of $56,000 to its common shareholders. Describe what will happen on each of the dates below in relation to this $56,000 dividend.

A. Date of declaration

B. Date of record

C. Date of payment


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