Perseverance Corporation is deciding whether to pursue a restricted or relaxed current investment policy. The firm's annual sales are expected to total P3,600,000, its fixed a turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. is P150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the com follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its assets turnover will be 2.2. What's the difference in the projected ROES under the restricted and relaxed policies? [R
Perseverance Corporation is deciding whether to pursue a restricted or relaxed current investment policy. The firm's annual sales are expected to total P3,600,000, its fixed a turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. is P150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the com follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its assets turnover will be 2.2. What's the difference in the projected ROES under the restricted and relaxed policies? [R
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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![I Perseverance Corporation is deciding whether to pursue a restricted or relaxed current asset
investment policy. The firm's annual sales are expected to total P3,600,000, its fixed assets
turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT
is P150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company
follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total
assets turnover will be 2.2.
What's the difference in the projected ROES under the restricted and relaxed policies? [Round
off to one decimal place.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b2d3900-3371-42e8-86f9-13f5bec518e3%2Fabe6acf2-0a61-4d61-bbee-07bfe9d8ea90%2Fhspuevj_processed.png&w=3840&q=75)
Transcribed Image Text:I Perseverance Corporation is deciding whether to pursue a restricted or relaxed current asset
investment policy. The firm's annual sales are expected to total P3,600,000, its fixed assets
turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT
is P150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company
follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total
assets turnover will be 2.2.
What's the difference in the projected ROES under the restricted and relaxed policies? [Round
off to one decimal place.)
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