6. Last year R&G Industries had sales of $270,000, assets of $175,000 (which equals total invested...

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6. Last year R&G Industries had sales of $270,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.1%, and an equity multiplier of 1.2. The CFO believes that the I company could reduce its assets by $40,000 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. HULUS 6. Last year R&G Industries had sales of $270,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.1%, and an equity multiplier of 1.2. The CFO believes that the I company could reduce its assets by $40,000 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. HULUS

Answer rating: 100% (QA)

To calculate the change in the Return on Equity ROE due to the reduction in assets we need to ... View the full answer