Assume that atlas sporting goods inc, has $840in assets. if it goes with a low liquidity plan for the assets if it goes with a low liquidity plan for the assets it can earn a return of 15 percent but with a high liquidity plan the return will be 12 percent If the firm goes with the short term financing plan the financing costs on the $840,000 will be 9 percent and with a lon term financing plan the financing costs on the $840,000 will be 11 percent
a. Compute the anticipated return after financing costs with the most aggressive fsset-financing mix.
b. Compute the anticipated return after financing costs wit the most conservative asset-financing mix.
c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.
d. If the firm used the most aggressive asset-financing mix described in part a and had the anticipated return you computed for part a, what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstanding?
e. Now assume the most conservative asset-financing mix described in part b will be utilized. The tax rate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earnings per share be? Would it be higher or lower than the earnings per share computed for the most aggressive plan computed in part d?