Last Year Ann Arbor Corp Had $250,000 of Assets (Which

question 77

Multiple Choice

Last year Ann Arbor Corp had $250,000 of assets (which equals total invested capital) ,$305,000 of sales,$20,000 of net income,and a debt-to-total-capital ratio of 37.5%.The new CFO believes that a new computer program will enable the company to reduce costs and thus raise net income to $33,000.The firm finances using only debt and common equity.Assets,total invested capital,sales,and the debt to capital ratio would not be affected.By how much would the cost reduction improve the ROE? Do not round your intermediate calculations.

• A) 8.15%
• B) 8.57%
• C) 8.82%
• D) 6.74%
• E) 8.32%

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Definitions:

Organisational Design

The process of structuring an organization in order to effectively manage resources, operations, and achieve goals.

Lateral Communication

The exchange of information, ideas, or requests between individuals at the same level within an organizational hierarchy.

Mechanistic and Organic Designs

Two contrasting organizational structures where mechanistic designs are rigid and hierarchical, suited for stable environments, whilst organic designs are more flexible and adaptive, ideal for dynamic environments.

Organic Design

A design philosophy that seeks to be holistic, fluid, and cohesive, often inspired by natural forms and processes.