Response to the following problem:
Celtic Arts, Inc., earned $50,000 in 2007 and $80,000 in 2008. The company began operations on January 1, 2007, with a $600,000 investment by stockholders and no debt. On June 30, 2008, the company borrowed $1,000,000 from a bank, payable in 10 years.
a. Determine the rate earned on total assets and the rate earned on total stockholders' equity for 2007. Round to two decimal places.
b. Determine the rate earned on total assets for 2008. Round to two decimal places.
c. Use the leverage formula to determine the rate earned on stockholders' equity for 2008.