Last Year Rennie Industries Had Sales of $280,000,assets of $175,000

question 10

Multiple Choice

Last year Rennie Industries had sales of $280,000,assets of $175,000 (which equals total invested capital) ,a profit margin of 5.3%,and an equity multiplier of 1.2.The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs.The firm finances using only debt and common equity.Had it reduced its assets by this amount,and had the debt/total invested capital ratio,sales,and costs remained constant,how much would the ROE have changed? Do not round your intermediate calculations.

• A) 4.23%
• B) 3.26%
• C) 3.77%
• D) 3.43%
• E) 4.19%

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Definitions:

Cost Data

Information related to the expenses incurred in producing a product or providing a service, including materials, labor, and overhead.

Output Level

The quantity of goods or services produced by a business or economy within a certain period.

Short-Run Equilibrium

The condition in which, in the short term, the quantity of goods supplied equals the quantity of goods demanded at the current price.

Marginal Revenue

The income increment from disposing of an extra unit of a good or service.