Last Year Central Chemicals Had Sales of $205,000, Assets of $127,500

Multiple Choice

Last year Central Chemicals had sales of $205,000, assets of $127,500, a profit margin of 5.3%, and an equity multiplier of 1.2.The CFO believes that the company could reduce its assets by $21,000 without affecting either sales or costs.Had it reduced its assets in this amount, and had the debt-to-assets ratio, sales, and costs remained constant, by how much would the ROE have changed?

A) 1.81%
B) 2.02%
C) 2.22%
D) 2.44%
E) 2.68%