Last year ann arbor corp had $240,000 of assets (which equals total invested capital), $305,000 of sales, $20,000 of net income, and a debt-to-total-capital ratio of 37. 5%. The new cfo believes that a new computer program will enable the company to reduce costs and thus raise net income to $33,000. The firm finances using only debt and common equity. Assets, total invested capital, sales, and the debt to capital ratio would not be affected.
Required:
By how much would the cost reduction improve the roe? do not round your intermediate calculations
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Last year ann arbor corp had $240,000 of assets (which equals total invested capital), $305,000 of s...
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