Kojak Corporation decided to issue common stock and used the $300,000 proceeds to redeem all of its outstanding bonds on January 1, 2017. The following information is available for the company for 2017 and 2016. LO6 2017 2016 Net income $ 182,000 $ 150,000 Dividends declared for preferred stockholders 8,000 8,000 Average common stockholders’ equity 1,000,000 700,000 Total assets 1,200,000 1,200,000 Current liabilities 100,000 100,000 Total liabilities 200,000 500,000 Instructions

(a) Compute the return on common stockholders’ equity for both years.

(b) Explain how it is possible that net income increased but the return on common stockholders’

equity decreased.

(c) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company’s solvency.