1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
lions [1.4K]
3 years ago
7

Last year Ann Arbor Corp had $195,000 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 a new computer program will enable it 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.
Business
1 answer:
lubasha [3.4K]3 years ago
8 0

Answer:

The cost reduction would improve the ROE by 10.67%

Explanation:

Debt is 37.5% of Total capital or we can say equity is 62.5% of total capital.

Total capital = $195,000

Equity = $195000*62.5%

           = $121,875

Old ROE = (Net income/Total Equity)*100

               = ($20,000/$121875)*100

               = 16.41025641%

New ROE = ($33000/$121875)*100

                 = 27.076923076%

Improvement in ROE = 27.076923076% - 16.41025641%

                                   = 10.6666666666%

Therefore, The cost reduction would improve the ROE by 10.67%

You might be interested in
You take out a loan for $100,000 at an annual interest rate of 5.9% that is to be paid with three equal annual payments of $37,3
Hunter-Best [27]

Answer:

The principal repaid in the second year will be $33,296.

Explanation:

Out of each 37,341.79 payment a part of it will be principal repayment and a part of it will be interest payment. When the first 100,000 is paid (0.059*100,000)=5,900 is interest and (37,341-5,900)= 31,441 is principal repayment which means, that in the second year the principal remaining is (100,000-31,441)=68,559. So the interest payment in the second year will be (0.059*68,559)=4,045 and the principal repaid will be (37,341-4,045)=33,296.

8 0
3 years ago
Art B.Traytor, a member of the American Arbitration Association and long-standing faculty member of the business school of a lar
valentina_108 [34]
The answer would be
6 0
3 years ago
I got called a street walker for this outfit,makeup and jewelry that i didn't even want to wear by my stepfamily when my cousin
yuradex [85]
You look like a burned victim
4 0
3 years ago
In what way does the strategic alliance between gm and lyft allow gm to hedge against uncertainty?.
san4es73 [151]

The strategic alliance between GM and Lyft allows GM to hedge against uncertainty by giving GM access to the market of the future, increasing its market innovation.

Through this strategic alliance, GM demonstrates innovation in its processes by investing in a car rental market, as there is an expectation that in the future there will be a drastic reduction in private cars.

<h3 /><h3>What is a strategic alliance?</h3>

Corresponds to an agreement between two or more companies, where there is an independent partnership for sharing organizational resources, such as technology, market and knowledge.

Therefore, through the partnership with Lyft, GM is already entering an innovative and expanding market, developing its positioning strategy for the future.

Find out more about strategic alliance here:

brainly.com/question/13710961

#SPJ1

6 0
1 year ago
TufStuff, Inc., sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry. One of th
Rama09 [41]

The selling price of one unit of products less the variable manufacturing expenses is the contribution margin per unit. The amount that each sale contributes to covering fixed costs is known as the contribution margin per unit. It will show the profit per unit sold once the fixed costs have been paid.

<h3>How to find the Contribution margin per unit and Contribution margin per welding hour?</h3>

Computation of Contribution margin per unit (Assuming Direct Labor exists Fixed cost)

Manufactured

Purchased WVD drums  WVD drums    Bike frames

Selling price                            $233.00 $233.00 $344.00

Variable costs:  

Direct materials                      $201.00 $52.10 $112.00

Variable manufacturing overhead $0.00 $1.35 $1.90

Variable selling and administrative  $0.75  $0.75  $3.40

Total variable cost                          201.75  54.2 $117.30

Contribution margin per unit $31.25 $178.80 $226.70

Computation of Contribution margin per welding hour

Manufactured

                                                   WVD drums        Bike frames

Contribution margin per unit          $178.80              $226.70

Welding hours per unit                         0.4              0.5

Contribution margin per welding hour   $447.00      $453.40

Ranking                                                     2                 1

To learn more about contribution margin per unit refer to:

brainly.com/question/15684424

#SPJ4

4 0
2 years ago
Other questions:
  • A machine with a cost of $133,000 and accumulated depreciation of $86,500 is sold for $53,000 cash. The amount that should be re
    5·1 answer
  • Defining the communications objectives to be accomplished and then, estimating the costs associated with the performance of the
    13·1 answer
  • Rick's Internet Corporation's balance in Retained Earnings is $30,000. The board of directors directs that $15,000 be appropriat
    8·1 answer
  • Both Bond Bill and Bond Ted have 10.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 ye
    11·1 answer
  • Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 9 pounds of direct materials at a cost of $3
    15·1 answer
  • Company X had net income of $200,000 in the year 2016. At the beginning of 2016, there were 500,000 shares of outstanding common
    7·1 answer
  • Monsters Incorporated (MI) in ready to launch a new product. Depending upon the success of this product, MI will have a value of
    15·1 answer
  • The summer internship is five weeks long, approximately 30 hours per week for 150 hours total.
    5·1 answer
  • Access Macros are built from a set of predefined actions, allowing you to automate common tasks.
    6·1 answer
  • a cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. review the stat
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!