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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?
Consider the Gleneagles Hotel in Scotland - it is unique, not part of a chain. It is a six star hotel with world class sports facilities with two championship golf courses, which h
What factors influence the choice of evaluation design? Which of these factors would have the greatest influence on your choice of an evaluation design? Which would have the smalle
Howard Electronics, a small manufacturer of electronic research equipment, has approximately 7,000 items in its inventory and has hired Joan Blasco-Paul to manage its inventory. Jo
Based on your analysis, select one of the five forces and explain how Bill can incorporate his analysis of that force into his Strategic Business Plan (SBP).
Harrison Clothiers' stock currently sells for $26.00 a share. It just paid a dividend of $2.25 a share (i.e., D0 = 2.25). The dividend is expected to grow at a constant rate of 7%
Explain the problems of homelessness based upon the developmental, situational, and human needs perspectives, what make a person become homeless, when they are well educated and no
What is operations strategy? Answer: Operations strategy is the plan and actions taken at operational level to support and implement the business strategy. An operations strate
Alaska Power Company issued $1,000 bonds that have an annual coupon rate of 7.5%. The present market value of the bonds is $1,125. If the bonds have 15 years remaining until maturi
You are very annoyed by one of your third-party service providers (3PL) and want to confront him and re-negotiate a new relationship. How would you go about this important task?
1) You've had a variety of weekly leaders in this class, and you've all turned in Status Reports. What can you do to improve that process and better evaluate and manage your teamma
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