QUESTION 5

1. Stone Cold Incorporated

   Balance Sheet: 12/31/12
   Assets	2012	2011
   Cash and Marketable Securities	10	80
   Accounts Receivable	375	315
   Inventories	615	415
   Total Current Assets	1,000	810
   Net plant and equipment	1,000	870
   TOTAL ASSETS	2,000	1,680

   Liabilities and Equity	2012	2011
   Accounts Payable	60	40
   Notes Payable	140	60
   Accruals	110	130
   Total Current Liabilities	310	230
   Long Term Bonds	754	580
   TOTAL DEBT	1,064	810
   Preferred Stock	40	40
   Common Stock	130	130
   Retained earnings	766	700
   TOTAL COMMON EQUITY	896	830
   TOTAL LIABILITIES AND EQUITY	2,000	1,680

   Income Statement: 12/31/12	2012	2011
   Net Sales	3,200	2,850
   Operating Costs (excludes Dep/Amortization)	2,700	2,497
   EBITDA	500	353
   Depreciation	100	90
   Amortization	0	0
   Depreciation and Amortization	100	90
   EBIT	400	263
   Less Interest	88	60
   EBT	312	203
   Taxes (40%)	124.8	81.2
   NET INCOME (before Preferred Dividends)	187.2	121.8
   Preferred Dividends	4	4
   NET INCOME	183.2	117.8
   Common Dividends	117	53
   Addition to Retained Earnings	66.2	64.8

   Refer to Stone Cold. For 2012, what was the return on common equity?

   		9.36%
   		12.40%
   		20.44%
   		20.90%