The calgary company is attempting to establish a current

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The Calgary Company is attempting to establish a current assets policy. Fixed assets are $600,000, and the firm plans to maintain a 50 percent debt-to-assets ratio. Calgary has no operating current liabilities. The interest rate is 10 percent on all debt. Three alternative current asset policies are under consideration: 40, 50, and 60 percent of projected sales. The company expects to earn 15 percent before interest and taxes on sales of $3 million. Calgary"s effective federal plus- state tax rate is 40 percent. What is the expected return on equity under each alternative?

Reference no: EM13572901

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