EXERCISE 15-20 - return on common stock equity is greater than interest paid on bonds Note Some analysts use after-tax interest expense to compute

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EXERCISE 15-20 (15 minutes) (a) Rate of return on common stock equity: $213,718 $213,718 $875,000 + $575,000 = $1,450,000 = 14.7% Rate of interest paid on bonds payable: $135,000 $1,500,000 = 9% (b) Potter Plastics, Inc. is trading on the equity successfully, since its
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Unformatted text preview: return on common stock equity is greater than interest paid on bonds. Note: Some analysts use after-tax interest expense to compute the bond rate....
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This note was uploaded on 01/31/2011 for the course ACCT 302 taught by Professor Leee during the Spring '10 term at Grand Rapids Community College.

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