Last Year Kruse Corp Had $305,000 of Assets, $403,000 of Sales

Multiple Choice

Last year Kruse Corp had $305,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets 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 to $252,500. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total debt) . By how much would the reduction in assets improve the ROE?

A) 2.85%
B) 3.00%
C) 3.16%
D) 3.31%
E) 3.48%