You must show your work for all questions.
1. Kruger Equipment has $9 million in sales. Its ROE is 12% and its total assets turnover is 3. The company is 80% equity financed. What is the company's net income? *Round to the nearest dollar.
2. Last year Jiffy Park Inc. had $155,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-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.
a. How much will this cost reduction improve Jiffy Park's ROE?