Last Year Rosenberg Corp

question 65

Multiple Choice

Last year Rosenberg Corp.had $195,000 of assets, $18,775 of net income, and a debt-to-total-assets ratio of 32%.Now suppose the new CFO convinces the president to increase the debt ratio to 48%.Sales and total assets will not be affected, but interest expenses would increase.However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged.By how much would the change in the capital structure improve the ROE?

• A) 4.36%
• B) 4.57%
• C) 4.80%
• D) 5.04%
• E) 5.30%

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Definitions:

Working Class

A social class broadly characterized by individuals who perform manual labor or blue-collar jobs, and typically have lower socioeconomic status.

Culture of Poverty

A concept suggesting that poverty is not only a result of lack of economic resources but also a result of a specific set of social and cultural values shared among people living in poverty.

Deferred Gratification

The capacity to withstand the allure of an instant gratification in favor of receiving a reward at a future time.

Classism

Prejudice or discrimination based on social class, often manifesting as an unequal treatment of people from different economic and social backgrounds.