Problem 4 (5 points). Suppose Cary Corporation is considering installing a new computer system that would provide tighter control of inventories, accounts receivable, and accounts payable. If the new system is installed, the following data are projected (rather than the data given earlier) for the indicated balance sheet and income statement accounts:
								Accounts receivable	$395,000
								Inventories	$700,000
Other fixed assets	$150,000
Accounts and notes payable	$275,000
Accruals	$120,000
Cost of goods sold	$3,450,000
Administrative and selling expenses	$248,775
P/E ratio	6.0
How do these changes affect the projected ratios and the comparison with the industry averages? (Note that any changes to the income statement will change the amount of retained earnings; therefore, the model is set up to calculate next years retained earnings as this years retained earnings plus net income minus dividends paid. The model also adjusts the cash balance so that the balance sheet balances.)