Muscarella Inc. has the following balance sheet and income statement data: $ 14,000 Accounts payable Other...

  

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Muscarella Inc. has the following balance sheet and income statement data: $ 14,000 Accounts payable Other current liabilities 70,000 210,000 Total CL $294,000 Long-term debt 126,000 Common equity $420,000 Total liab. and equity $280,000 Cash Receivables Inventories Total CA Net fixed assets Total assets Sales Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 3.40, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Select the correct answer. a. 1.68% b. 1.08% c. 1.28% d. 1.48% $ 42,000 28,000 $ 70,000 70,000 280,000 $420,000 e. 1.88% Muscarella Inc. has the following balance sheet and income statement data: $ 14,000 Accounts payable Other current liabilities 70,000 210,000 Total CL $294,000 Long-term debt 126,000 Common equity $420,000 Total liab. and equity $280,000 Cash Receivables Inventories Total CA Net fixed assets Total assets Sales Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 3.40, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Select the correct answer. a. 1.68% b. 1.08% c. 1.28% d. 1.48% $ 42,000 28,000 $ 70,000 70,000 280,000 $420,000 e. 1.88%

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