Last year Central Chemicals had sales of $340,000, assets of $127,500, a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $21,000 without affecting either sales or costs. Had it reduced its assets in this amount, and had the debt-to-assets ratio, sales, and costs remained constant, by how much would the ROE have changed?

Select the correct answer.

a. 3.06%

b. 2.78%

c. 3.62%

d. 3.90%

e. 3.34%