Stephen Hawkins, Inc., currently has a common stock $65,000 andretained earnings of $175,000. The firm is expecting the followingnet income and dividends for the next five years.
Year | 1 | 2 | 3 | 4 | 5 |
Net Income | $70,000 | $85,000 | $110,000 | ($30,000) | $30,000 |
Dividends distribution (% of Net income) | 40% | 35% | 50% | 0 | 20% |
Required:
Determine the Return on Equity for each year and average returnon equity for the 5-year period.
