Earth's Best Company has sales of $200,000, a net income of $15,000, and the following balance sheet:

Cash$ 10,000Accounts payable$ 30,000

Receivables50,000Other current liabilities20,000

Inventories150,000Long-term debt 50,000

Net fixed assets 90,000Common equity200,000

Total assets$300,000Total liabilities and equity$300,000

1. The company's new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting either sales or net income. If inventories are sold off and not replaced so as to reduce the current ratio to 2.5x, if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the return on equity (ROE) change?