Last Year Ann Arbor Corp Had $155,000 of Assets, $305,000

Multiple Choice

Last year Ann Arbor Corp had $155,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-total-assets 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. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?

A) 11.51%
B) 12.11%
C) 12.75%
D) 13.42%
E) 14.09%