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Falcons Inc has the following balance sheet and income statement data: Cash $ 1 4 , 0 0 0 Accounts payable $ 5 3 ,

Falcons Inc has the following balance sheet and income statement data:
Cash $14,000 Accounts payable $53,000
Receivables $70,000
Other current liab.
$37,000
Inventories $270,000 Total CL $90,000
Total CA $354,000 Long-term debt $110,000
Net fixed assets $136,000 Common equity $290,000
Total assets $490,000 Total liab. and equity $490,000
Sales $280,000
Net income $23,000
The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.56, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Report answer to the fourth decimal place.

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