Chapter 11, Problem 5BTN

1.

To determine

Preferred Stock: The part of the stockholder’s capital in which there are special rights as compared to equity to the shareholder. The rights attached are fixed dividends and preferential treatment when there is a situation of liquidation and payment of the dividend is made.

Common Stock: The total amount of money a business owner includes in business is the common stock. The owner can use the rights by voting for important matters in the general meetings of the company.

Rate of Return: The return on the investment in terms of percentage over a particular time period is stated as the rate of return. This value is determined by dividing the net return from investment by the initial cost of the investment.

To compute: The rate of return on beginning equity which can be earned by the founder. Also, explain the plan in which maximum return can be expected.

2.

To determine

Rate of Return: The return on the investment in terms of percentage over a particular time period is stated as the rate of return. This value is determined by dividing the net return from investment by the initial cost of the investment.

To compute: The rate of return on beginning equity which can be earned by the founder. Also, explain the plan in which maximum return can be expected.

3.

To determine

Rate of Return: The return on the investment in terms of percentage over a particular time period is stated as the rate of return. This value is determined by dividing the net return from investment by the initial cost of the investment.

To analyze: The difference between the results of Parts 1 and 2.