Monet, Inc., is authorized to issue 1,500,000 shares of no-par common stock and 800,000 shares of $40 par value 6 percent preferred stock. During its first year of operation, the company plans to issue 800,000 shares of common stock for $6,400,000 and 20,000 shares of its preferred stock for $1,100,000. The company anticipates net income of $550,000 for the year and plans to pay dividends of $150,000 during the year.
What would be the total amount of the company’s shareholders’ equity at the end of the year?
How much of the company would be financed by contributions by its owners and how much by its operations?
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?
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