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Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $2 million as a result of an asset expansion presently being undertaken. Fixed assets total $1 million, and the firm plans to maintain a 60% debt ratio. Rentz's interest rate is currently 8% on both short-term and longer-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current asset level are under consideration: (1) a tight policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 12% of total sales, and the federal-plus-state tax rate is 40%.a. What is the expected return on equity under each current asset level?b. In this problem, we assume that expected sales are independent of the current asset policy. Is this a valid assumption? Why or why not?c. How would the firm's risk be affected by the different policies?
What types of competitive strategies are the most effective, and will the same strategy work in most venues? Why or why not? Please provide reference page
abc inc. sells all its merchandise on credit. it has a profit margin of 4 an average collection period of 60 days
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Suppose that we back-test a VaR model using 1,000 days of data. The VaR confidence level is 99% and we observe 15 exceptions. Should we reject the model at 5% confidence level. Use Kupiec's two-tailed test.
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Which one of the following had the largest risk premium for the period of 1926-2008?
this activity gives you the opportunity to analyze a business plan proposal.nbsp you will incorporate your knowledge
Fern has preferred stock selling for 95 percent of par that pays an 8 percent annual coupon. What would be Fern's component cost of preferred stock?
What are the advantages and disadvantages of discounted cash flow methods such as NPV and IRR?
Suppose you short sell 100 shares of IBM, now selling at $120 per share. What is your maximum possible loss? What happens to the maximum loss if you simultaneously place a stop-buy order at $128.
Dan Ervin was recently employed by East Coast Yachts to assist the company with its short-term financial planning and also to evaluate the company?s financial performance.
If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, in which ratios would each group be most interested, and for what reasons?
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