ine capital asset pricing model to find the rcquired retim on this investmentQ3: Company currently has total assets of $4 million, of which current assets comprise $0.5 million. Sales are $9million annually, and the before-tax net profit margin (the firm currently has no interest-bearing debt) is 13 percent.Current assets levels of $0.5 million and $0.7 million are being considered instead of the $0.5 million presently held.Any additions to current assets would be financed with new equity capital.a. Determine the total asset turnover, before-tax return on investment, and before-tax net profit margin under thethree alternative levels of current assets.b. If the new additions to current assets were financed with long-term debt at 14 percent interest, what would be thebefore-tax interest "cost" of the two new policies?

Present level of fixed assets = $4 million - $0.5 million = $3.5 million. Total assets turnover and…

Answered: ine capitial asset pricing model to…

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

Problem 1PS

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Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions? Question content area bottom Part 1 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax rate of return is 1.711.71%. (Round to two decimal places.) Part 2 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax monetary return is $855855. (Round to the nearest dollar.) Part 3 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real rate…

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