Solution-Under a relaxed policy current assets will be 25

Under a relaxed policy current assets will be 25 percent of

Reference no: EM13478540

Richmond Enterprises is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are $400,000; its fixed assets are $100,000; debt and equity are each 50 percent of total assets. EBIT is $36,000, the interest rate on the firm's debt is 10 percent, and the firm's tax rate is 40 percent. With a restricted policy, current assets will be 15 percent of sales. Under a relaxed policy, current assets will be 25 percent of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?

Reference no: EM13478540

Questions Cloud

Recently financial markets have become highly integrated : 1. recently financial markets have become highly integrated. this developmenta allows investors to diversify their

Compare and contrast internal rate of return irr the net : compare and contrast the internal rate of return irr the net present value npv and payback approaches to capital

Your first assignment is to write a self-introduction : assignment descriptionyour first assignment is to write a self-introduction describing how you see yourself.your

There is a variable operating cost that is 60 of sales and : a company is evaluating a proposed 4-year project. the depreciable cost will include the following 300000 for the

Under a relaxed policy current assets will be 25 percent of : richmond enterprises is considering whether to pursue a restricted or relaxed current asset investment policy. the

Explain how a phobia could be called a form of classical : explain how a phobia could be called a form of classical

Te bonds mature in 11 years and have 1000 face value : bonds issued by stainless tubs bear an 8 coupon rate payable semiannually. the bonds mature in 11 years and have a

Suppose the exchange rate between us dollars and the swiss : you are the vice president of international infoxchange headquartered in chicago. all shareholders of the firm live in

What intial salary would ben need to receive to make him : ben bates graduated from college six years ago with a finance undergrad degree. although he is satisfied with his

User Account

All Pages

Under a relaxed policy current assets will be 25 percent of

Reference no: EM13478540

Reference no: EM13478540

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT