Last year Rennie Industries had sales of $270,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs. The firm finances using only debt and common equity. Had it reduced its assets by this amount, and had the debt/total invested capital ratio, sales, and costs remained constant, how much would the ROE have changed? Do not round your intermediate calculations. a. 3.03% b. 3.07% c. 4.04% d. 4.52% e. 4.08%

c. 4.04%

Explanation:

Calculation to determine how much would the ROE have changed

First step is to Calculate last year Last year profit

Last year profit = $270,000 × 5.3%

Last year profit = $14,310.00

Second step is to calculate Last year equity

$175,000/Last year equity = 1.2

Last year equity = $175,000/1.2

Last year equity= $145,833.33

Third step is to calculate Last year ROE

Last year ROE = $14,310.00/$145,833.33

Last year ROE= 0.0981*100

Last year ROE= 9.81%

Fourth step is to Calculate New asset value

New asset value = $175,000 - $51,000

New asset value = $124,000

Fifth step is to calculate Equity after asset reduction

Equity after asset reduction = $124,000/1.2

Equity after asset reduction = $103,333.33

Sixth step is to calculate ROE after asset reduction

ROE after asset reduction = $14,310.00/$103,333.33

ROE after asset reduction =0.1385*100

ROE after asset reduction =13.85%

Now let calculate amount of change in ROE

Using this formula

Change in ROE = ROE after asset reduction - Last year ROE

Let plug in the formula

Change in ROE = 13.85% - 9.81%

Change in ROE = 4.04%

Therefore how much would the ROE have changed is 4.04%

simpleton is the answer, this is simpleton work

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.