参考答案：C

解析：If the franchise cost had been amortized over six years beginning in 2003, net income in 2003 would have been $ 6 million instead of $1 million due to the cost of franchise expense of $ 6 million being eliminated and replaced by franchise amortization of $1 million. Net income in 2004 would have been reduced by the franchise amortization to $ 7 million instead of $ 8 million. On the equity side, retained earnings at the end of 2003 would have been $11 million ( $ 5 million higher), and total equity for 2003 would have been ( $ 8 + $11 = ) $19 million. Retained earnings for 2004 would be the 2003 retained earnings of $11 million increased by 2004 net income of $ 7 million for a total of $18 million, and total equity for 2004 would be ($8+$18=)$26 million. If the franchise cost were amortized, return on total equity for 2004 would be( $7/(19 +26)/2 = ) 31.1 percent.