Explain net income, Operation Management

Assignment Help:

Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $10 million in current assets and $15 million in fixed assets in its operations next year, and EBIT for next year is $8 million. The organization's income tax rate is 40%. Stockholders' equity will be used to finance $15 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies below. Current Assets: $10 million Fixed Assets: $15 million Total Assets : $25 million Stockholders' Equity: $15 million Total Amount of Assets to be financed by debt: $10 million Tax Rate: 40% Total EBIT: $8 million Aggressive Strategy Short Term Debt: $8 million, 6% interest rate Long Term Debt: $2 million, 8% interest rate Moderate Strategy Short Term Debt: $5 million, 5.5% interest rate Long Term Debt: $5 million,7.5% interest rate Conservative Strategy Short Term Debt: $3 million, 5.25% interest rate Long Term Debt: $7 million, 7.25% interest rate Determine the following for each policy: • Net Income • Expected rate of return on stockholders' equity (Net Income/Equity) • Net working capital position (Current Assets - Current Liabilities) • Current ratio (Current Assets/Current Liabilities) • Would you rate them low, medium, or high with respect to profitability? • Would you rate them low, medium, or high with respect to risk? • What is your recommendation to management? Why?


Related Discussions:- Explain net income

Explain what is the total cost of this policy, Rocky Mountain Tire Center s...

Rocky Mountain Tire Center sells 20,000 go-cart tires per year. The ordering cost for each order is $40, and the holding cost is 20% of the purchase price of the tires per year. Th

Explain embedding knowledge, "Embedding Knowledge" Please respond to the fo...

"Embedding Knowledge" Please respond to the following: •Determine the most appropriate way that "sense making" can be applied to health care organizations. Provide specific example

Describe how many bags per run are optimal, A chemical firm produces sodium...

A chemical firm produces sodium bisulfate in 100-pound bags. Demand for this product is 20 tons per day. The capacity for producing the product is 50 tons per day. Setup costs $100

Find out the nash equilibrium, In a project, executive and boss are working...

In a project, executive and boss are working together. The executive can be sincere  or insincere, and the Boss can either reward or penalize. The executive gets no advantage for b

Explain a risk of disciplining employees, A risk of disciplining employees ...

A risk of disciplining employees is that some employees retaliate. To avoid that risk, what organizational policies might encourage low-performing employees to leave while encourag

Explain what was harley davidson’s current market, What was Harley Davidson...

What was Harley Davidson's current market price per share in 2007?

Define the rationale behind the recommendations you offered, • Recommend st...

• Recommend strategic alternatives for the company you researched. Explain the rationale behind the recommendations you offered. • Analyze the different types of strategies disc

How to view intermingling of management, The chapter notes that in 2010, in...

The chapter notes that in 2010, in roughly two-thirds of U.S. firms, the CEO is also the chair of the board of directors. More broadly this can be viewed as an intermingling of man

Explain saving lives with social media, Compare and contrast the Haiti SM d...

Compare and contrast the Haiti SM discussion with the "Saving Lives with Social Media" case. Create a table that compares and contrasts elements from each. Is an emergent strategy

LPP, A PAPER MILL PRODUCES TWO GRADES OF PAPER VIZ., X AND Y. BECAUSE OF RA...

A PAPER MILL PRODUCES TWO GRADES OF PAPER VIZ., X AND Y. BECAUSE OF RAW MATERIAL RESTRICTIONS, IT CANNOT PRODUCE MORE THAN 400 TONS OF GRADE X PAPER AND 300 TONS OF GRADE Y PAPER I

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd