Rentz corporation is investigating the optimal level of

Reference no: EM13381713

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 60% debt-to-assets ratio. Rentz's interest rate is currently 8% on both short-term and longer-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current asset level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 10% of total sales, and the federal-plus-state tax rate is 40%.

What is the expected return on equity under each current asset level? Round your answers to two decimal places.

Reference no: EM13381713

Questions Cloud

Suppose you are 35 years old and want to save for your : suppose you are 35 years old and want to save for your retirement. you have two options a bond fund and a stock fund.

A explain how inflation affects the rate of return required : a explain how inflation affects the rate of return required on an investment project and also explain the distinction

1to get an overall picture of each companys capital : 1.to get an overall picture of each companys capital structure it is helpful to look at a chart that summarizes the

Rentz corporation is investigating the optimal level of : rentz corporation is investigating the optimal level of current assets for the coming year. management expects sales to

Rrsp is currently valued at 200000 his asset allocation is : rrsp is currently valued at 200000. his asset allocation is 10 liquid 40 fixed income 50 equity. for every change in

Impulse response function suppose a one-time tfp shock : impulse response function. suppose a one-time tfp shock occurs as shown below.as we have studied an increase in tfp

Running head coleman art museumcase study coleman art : running head coleman art museumcase study coleman art museumcase recapto start off the museum has shown a loss for the

Landing gear system structural designproblem statement : landing gear system structural designproblem statement consider the landing gear shown below. working in teprns of two

User Account

All Pages