Last year Viera Corp, an all-equity financed company, had $155,000 of assets (which equals total common equity), $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. Assets, total invested capital, sales, and the debt to capital ratio would not be effected. By how much would the cost reduction improve the ROE?

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The Answer of Last year Viera Corp, an all-equity financed company, had $155,000 of assets (which equals total common equity), $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. Assets, total invested capital, sales, and the debt to capital ratio would not be effected. By how much would the cost reduction improve the ROE?

Last Year Viera Corp, an All-Equity Financed Company, Had $155,000