What is the roe under each alternative

Reference no: EM13296127

Mos Company is attempting to establish a current assets policy. Fixed assets are $1M and the firm intends to maintain a 50% debt to assets ratio. Mos has no current liabilities. The interest rate is 8% on all debt.

Three alternative current asset policies are under consideration: 40%, 50%, 60% on sales

Mos expects to earn 20% before interest and taxes on sales of $4M. The tax rate is 40%.

What is the ROE under each alternative?

Reference no: EM13296127

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