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Last year Meyer Corp had $415,000 of assets, $403,000 of sales, $28,500 of net income, and a debt-to-total-capital ratio of 39%. The new CFO believes
Last year Meyer Corp had $415,000 of assets, $403,000 of sales, $28,500 of net income, and a debt-to-total-capital ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets and total invested capital to $254,000. Sales, costs, and net income would not be affected, and the firm would maintain the same % capital structure but with less total debt. By how much would the reduction in assets improve the ROE of the company?
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