projected at P3 million, the EBITisales ratio is projected at 15%, the interest rate is 10% on all 40%, and Calgary plans to maintain a 50% debt-to-assets ratio. Three alternative current asse consideration: 40%, 50%, and 60% of projected sales. What is the expected return on equity under restricted 40%?

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
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WORKING CAPITAL POLICY
Calgary Company is thinking of modifying its working capital assets policy. Fixed assets are P600,000, sales are
projected at P3 million, the EBIT/sales ratio is projected at 15%, the interest rate is 10% on all debt, the tax rate is
40%, and Calgary plans to maintain a 50% debt-to-assets ratio. Three alternative current asset policies are under
consideration: 40%, 50%, and 60% of projected sales.
What is the expected return on
equity under restricted 40%?
Your answer
What is the expected return on
equity under moderate 50%?
Your answer
What is the expected return on
equity under relaxed 60%?
Your answer
Transcribed Image Text:WORKING CAPITAL POLICY Calgary Company is thinking of modifying its working capital assets policy. Fixed assets are P600,000, sales are projected at P3 million, the EBIT/sales ratio is projected at 15%, the interest rate is 10% on all debt, the tax rate is 40%, and Calgary plans to maintain a 50% debt-to-assets ratio. Three alternative current asset policies are under consideration: 40%, 50%, and 60% of projected sales. What is the expected return on equity under restricted 40%? Your answer What is the expected return on equity under moderate 50%? Your answer What is the expected return on equity under relaxed 60%? Your answer
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