eBook Problem Walk-Through Lloyd Inc. has sales of $300,000, a net income of $15,000, and the following balance sheet: Cash $36,000 Accounts payable $62,640 Receivables 110,880 Notes payable to bank 46,080 Inventories 331,200 Total current liabilities $108,720 Total current assets $478,080 Long-term debt 131,760 Net fixed assets 241,920 Common equity 479,520 Total assets $720,000 Total liabilities and equity $720,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 1.75x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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 ROE change? Do not round intermediate calculations. Round your answer to two decimal places. % what will be the firm's new quick ratio? Do not round intermediate calculations, Round your answer to two decimal places. Activate Windows Save Submit Test for Grading Questions Question 6 of 10 4 OO S. 6. 7. Last year Jandik Corp, had $295,000 of assets (which is equal to its total invested capital), 818,750 of net income, and a debt-to-total-capital ratio of 37%. Now suppose the new CFO convinces the president to increase the debt-to-total-capital ratio to 48%, Sales, total assets and total invested capital will not be affected, but interest expenses would increase. However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged. By how much would the change in the capital structure improve the ROE? Do not round your intermediate calculations. O a. 2.50 8. O 9. 10. O b. 1.64% c. 2.134 d. 2.609 O e. 2.3795 Activate Windows