Projected roes under the restricted and relaxed policies

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ABC Corp. is deciding whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $1.5M, its fixed assets turnover ratio equals 3.5, and its debt is 45% of total assets. EBIT is $250,000, the interest rate on the firm's debt is 8%, and the tax rate is 32%. If the company follows a restricted policy, its total assets turnover will be 2.7. Under a relaxed policy its total assets turnover will be 2.2 Refer to Multi-Part 23. What's the difference in the projected ROEs under the restricted and relaxed policies?

Reference no: EM131556088

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