Last Year Kruse Corp Had $440,000 of Assets (Which Is

question 123

Multiple Choice

Last year Kruse Corp had $440,000 of assets (which is equal to its total invested capital) ,$403,000 of sales,$28,250 of net income,and a debt-to-total-capital ratio of 39%.The new CFO believes the firm has excessive fixed assets and inventory that could be sold,enabling it to reduce its total assets and total invested capital to $252,500.The firm finances using only debt and common equity.Sales,costs,and net income would not be affected,and the firm would maintain the same capital structure (but with less total debt) .By how much would the reduction in assets improve the ROE? Do not round your intermediate calculations.

• A) 7.82%
• B) 8.21%
• C) 8.91%
• D) 7.97%
• E) 7.35%

---

Definitions:

Self-actualizing

The process of realizing one's full potential, as per Abraham Maslow's hierarchy of needs, emphasizing creativity, growth, and personal development.

Maslow

An American psychologist who created the hierarchy of needs, a theory in psychology concerning human motivation based on prioritized needs.

Spontaneous

Occurring without apparent external cause; impromptu or unplanned.

Reproductive Payoffs

Benefits or advantages obtained through reproducing, often in the context of evolutionary biology, referring to the success of passing genes to the next generation.