Problem 4 (10 Points) Lloyd, Inc. has sales of $1,000,000, a net income of $75,000, and the following balance sheet: Cash Receivables Inventories Net Fixed Assets Total Assets 50,000 Accounts Payable 250,000 Other Current Liabilities 750,000 Long-term Debt 450,000 Common Equity $1,500,000 Total Liabilities & Equity 150,000 100,000 250,000 1,000,000 $1,500,000 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 of 3.2x, without affecting sales or net income. If inventories are sold off and not replaced (thus reducing the current ratio to 3.2x), the funds generated will be 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? What will be the firm's new quick ratio