FINANCE I #4 DUE TOMORROW AT 7AM EST PLAGIARISM FREE / QUALITY WORK
ADDRESS ALL PAPER REQUIREMENTS – QUALIY WORK
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Now
Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $30 million in current assets and $35 million in fixed assets in its operations next year, provided the level of current assets, anticipated sales, and EBIT for next year are $60 million and $6 million, respectively. The organization’s income tax rate is 40%. Stockholders’ equity will be used to finance $40 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies in the diagram.
Amount of Short-Term Debt
Financial Policy |
Millions of dollars |
LTD (%) |
STD (%) |
Aggressive |
$24 |
8.5 |
5.5 |
Moderate |
$18 |
8.0 |
5.0 |
Conservative |
$12 |
7.5 |
4.5 |
Determine the following for each policy:
· Expected rate of return on stockholders’ equity
· Net working capital position
· Current ratio
Write a 1,750-word paper in which you evaluate profitability versus risk trade-offs of these policies. Would you rate them low, medium, or high with respect to profitability? Would you rate them low, medium, or high with respect to risk?
Format your paper consistent with APA guidelines.