Problem:
ABC is attempting to establish a current assets policy. Fixed assets are $600,000 and the firm plans to maintain a 50% debt ratio. ABC has on operating current liabilities the interest rate on debt is 10%. There alternative current asset polices are under consideration: 40%.50% and 60% on sales. The company expects to earn 15% before interest and taxes on sales of $3milion. The tax rate is 40%. What is the ROI under each alternative?