Year Urbana Corphad $197,500 of Assets, $307,500 of Sales, $19,575

question 33

Multiple Choice

year Urbana Corphad $197,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total-assets ratio of 37.5% The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000 Assets, sales, and the debt ratio would not be affected By how much would the cost reduction improve the ROE?

• A) 9.32%
• B) 9.82%
• C) 10.33%
• D) 10.88%
• E) 11.42%

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Definitions:

Make-Or-Buy Options

The decision-making process where a company chooses between manufacturing a product in-house or purchasing it from an external supplier.

Differential Revenue

The difference in revenue generated under two different scenarios or choices.

Differential Revenue

The difference in revenue generated from two different business decisions, often used in managerial accounting to assess alternatives.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you could have received by taking an alternative action.