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Sagot :
Answer:
c. 4.04%
Explanation:
Calculation to determine how much would the ROE have changed
First step is to Calculate last year Last year profit
Last year profit = $270,000 × 5.3%
Last year profit = $14,310.00
Second step is to calculate Last year equity
$175,000/Last year equity = 1.2
Last year equity = $175,000/1.2
Last year equity= $145,833.33
Third step is to calculate Last year ROE
Last year ROE = $14,310.00/$145,833.33
Last year ROE= 0.0981*100
Last year ROE= 9.81%
Fourth step is to Calculate New asset value
New asset value = $175,000 - $51,000
New asset value = $124,000
Fifth step is to calculate Equity after asset reduction
Equity after asset reduction = $124,000/1.2
Equity after asset reduction = $103,333.33
Sixth step is to calculate ROE after asset reduction
ROE after asset reduction = $14,310.00/$103,333.33
ROE after asset reduction =0.1385*100
ROE after asset reduction =13.85%
Now let calculate amount of change in ROE
Using this formula
Change in ROE = ROE after asset reduction - Last year ROE
Let plug in the formula
Change in ROE = 13.85% - 9.81%
Change in ROE = 4.04%
Therefore how much would the ROE have changed is 4.04%
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