Bulldogs Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are P500,000; its fixed assets are P200,000; debt and equity are each 50% of total assets. EBIT is P40,000, the interest rate on the firm's debt is 10%, and the firm's tax rate is 25%. Current assets will be 10% of sales with a restricted policy. Under a relaxed policy, current assets will be 20% of sales. What is the difference in the projected ROES between the restricted and relaxed policies? * O O 3.20% O 3.57% O 5.40% O 4.00%
Bulldogs Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are P500,000; its fixed assets are P200,000; debt and equity are each 50% of total assets. EBIT is P40,000, the interest rate on the firm's debt is 10%, and the firm's tax rate is 25%. Current assets will be 10% of sales with a restricted policy. Under a relaxed policy, current assets will be 20% of sales. What is the difference in the projected ROES between the restricted and relaxed policies? * O O 3.20% O 3.57% O 5.40% O 4.00%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Bulldogs Inc. is considering whether to pursue a restricted or relaxed current asset investment
policy. The firm's annual sales are P500,000; its fixed assets are P200,000; debt and equity are
each 50% of total assets. EBIT is P40,000, the interest rate on the firm's debt is 10%, and the
firm's tax rate is 25%. Current assets will be 10% of sales with a restricted policy. Under a
relaxed policy, current assets will be 20% of sales. What is the difference in the projected ROES
between the restricted and relaxed policies? *
O 3.20%
O 3.57%
O 5.40%
O 4.00%
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