Display a moderate current asset investment policy

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Display a moderate current asset investment policy, however it is now considering a change, maybe to a restricted or maybe to a relaxed policy. The firm's annual sales are $400,000 its fixed assets are $100,000 its target capital structure calls for 50% debt as well as 50% equity its EBIT is $35,000 the interest rate on its debt is 10% and its tax rate is 40%. With a restricted policy current assets will be 15% of sales while under a relaxed policy they will be 25% of sales. What is the variance in the projected ROEs between the restricted and relaxed policies?

Reference no: EM13111250

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