Effects of cost reduction

Reference no: EM1368614

Last year, Urbana Corporation had $197,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total assets ratio of 37.5 percent. The new CFO believes a new computer software application 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?

Reference no: EM1368614

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