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Last year Urbana Corp. had $207,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes
Last year Urbana Corp. had $207,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE? Select the correct answer. a. 8.91% b. 10.35% c. 9.63% d. 9.27% e. 9.99%
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