Question
Carefree Company provides the following selected financial information for Year 2000: Sales $17,633 Net Income $405 Interest expense before taxes $245 Preferred stock dividend $27
Carefree Company provides the following selected financial information for Year 2000: Sales $17,633 Net Income $405 Interest expense before taxes $245 Preferred stock dividend $27 Tax rate 35%
End of 2000 Beginning of 2000 Total assets $17,787 $18,048 Preferred stock 333 363 Common shareholders equity 6,037 5,766
Calculate the amount of net income available to common stockholders derived from the use of financial leverage with respect to creditors capital, the amount derived from the use of preferred shareholders capital, and the amount derived from common shareholders capital for Year 2000. (Hint: calculate the return generated by the assets financed by debt, preferred equity, and common equity individually, then subtract the cost of the corresponding financing. Debt amount can be recovered using the balance sheet info.)
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