Explain net income, Operation Management

Assignment Help:

Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $10 million in current assets and $15 million in fixed assets in its operations next year, and EBIT for next year is $8 million. The organization's income tax rate is 40%. Stockholders' equity will be used to finance $15 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies below. Current Assets: $10 million Fixed Assets: $15 million Total Assets : $25 million Stockholders' Equity: $15 million Total Amount of Assets to be financed by debt: $10 million Tax Rate: 40% Total EBIT: $8 million Aggressive Strategy Short Term Debt: $8 million, 6% interest rate Long Term Debt: $2 million, 8% interest rate Moderate Strategy Short Term Debt: $5 million, 5.5% interest rate Long Term Debt: $5 million,7.5% interest rate Conservative Strategy Short Term Debt: $3 million, 5.25% interest rate Long Term Debt: $7 million, 7.25% interest rate Determine the following for each policy: • Net Income • Expected rate of return on stockholders' equity (Net Income/Equity) • Net working capital position (Current Assets - Current Liabilities) • Current ratio (Current Assets/Current Liabilities) • Would you rate them low, medium, or high with respect to profitability? • Would you rate them low, medium, or high with respect to risk? • What is your recommendation to management? Why?


Related Discussions:- Explain net income

Depict diagram a complex system, Diagram a complex system (a series of caus...

Diagram a complex system (a series of causal loops and their interconnections) for the ecosystem of your choice (desert, rainforest, tidal marsh, etc.).

#titCAREING FOR TODDLERle.., HOW TO CARE FOR A TODDLERn #Minimum 100 words ...

HOW TO CARE FOR A TODDLERn #Minimum 100 words accepted#

Objectivise and benefits of work study, Objectivise and Benefits of Work St...

Objectivise and Benefits of Work Study Objectivise of Work Study a)Provide more and improved physical means to motivate the workers. b)Improve the basic process by resear

Stepping stone methods, Stepping Stone Methods : This is a procedure  ...

Stepping Stone Methods : This is a procedure  of determining the optimal if any for improving  each  of the non basic  variables  in terms of the objective function. To determ

Describe why variable pay-for-performance plans, Discuss why variable pay-f...

Discuss why variable pay-for-performance plans have become popular and what elements are needed to make them successful.

Explain project often require trade-offs, Project often require trade-offs ...

Project often require trade-offs among all of the following EXCEPT- A. Scope (size) B. Cost C. Schedule D. Programs

Describe the cleanliness and atmosphere, First, select an independent resta...

First, select an independent restaurant located in California (fast food, fast casual restaurant, casual dining restaurant or buffet restaurant) and dine in the restaurant. You wil

Types of process designs, Types of Process Designs The basic type of p...

Types of Process Designs The basic type of production system and the finished goods inventory policy to be used must be decided at the earliest stages of process planning. The

Explain profit sharing plans have no criticism, All of the following statem...

All of the following statements about profit sharing are true/ except/1.profit sharing plan reward staff based on organization profits/2.profit reward a person according to measure

Legal rules for recovery of the amounts, MJZ Corporation had a checking acc...

MJZ Corporation had a checking account with Gulfstream Bank. So that customers who close their accounts would not be embarrassed by having their checks bounce, the bank routinely h

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd