Final answer:
If the net income of Blease Inc had increased by $10,250 without changing its sales, assets, or capital structure, the Return on Equity (ROE) would have changed by 2.15%.
Step-by-step explanation:
To calculate the change in Return on Equity (ROE), we can use the DuPont formula which states that ROE is equal to the product of two ratios: asset turnover and equity multiplier. Given that last year's asset turnover was 1.33 and equity multiplier was 1.75, the initial ROE can be calculated as 1.33 x 1.75 = 2.3275 or 232.75%. If the net income increased by $10,250 without changing sales, assets, or capital structure, the new net income would be the old net income plus $10,250. To find the new ROE, we divide the new net income by the initial equity. Therefore, the new ROE is (old net income + $10,250) / (total assets x equity multiplier) = (old net income + $10,250) / (old net income x equity multiplier) = (old net income + $10,250) / (old net income x 1.75) = (old net income / old net income) + ($10,250 / (old net income x 1.75)). Simplifying this equation, we find that the change in ROE is $10,250 / (old net income x 1.75). Therefore, the change in ROE is 10,250 divided by the initial net income multiplied by the equity multiplier. Using the given information, the change in ROE is $10,250 / (0.75 x 1.75) = 5,000. Dividing this by the initial ROE, we get 5,000 / 232.75% = 0.0215 or 2.15%. Therefore, if the net income had increased by $10,250, the ROE would have changed by 2.15%.