Assume Now That the Company Believes That If It Adopts

question 25

Multiple Choice

Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10%, but its total assets turnover, debt ratio, interest rate, and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies?

• A) 2.24%
• B) 2.46%
• C) 2.70%
• D) 2.98%
• E) 3.27%

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Definitions:

Ambulatory Surgery

Surgical procedures performed on patients who are admitted and discharged on the same day.

Cyst Removal

A surgical procedure aimed at removing cysts, which are enclosed sac-like structures that may contain liquid, semisolid, or gaseous material.

Splinting

A medical procedure that involves the application of a stiff material to an area of the body to immobilize it, allowing for proper healing of injuries.

Abdominal Incision

A surgical cut made in the abdomen, either for medical procedures or for access to internal organs.