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FIN - Scott Equipment Organization




Question;Scott Equipment Organization is investigating various combinations of short- and long-term debt in financing assets. Assume the organization has decided to employ $30 million in current assets and$35 million in fixed assets in its operations next year, provided the level of current assets, anticipated sales, and EBIT for next year are $60 million and $6 million, respectively. The organization?s income tax rate is 40%. Stockholders? equity will be used to finance $40 million of assets, with the remainder financed by short- and long-term debt. The organization is considering implementing one of the policies in the diagram.Financial policy Aggressive(large amount of short? term debt)Moderate (moderate amount of short? term debt)Conservative (small amount of short term debt)Millions of dollars$24LTD (%)8.5STD (%)5.5$188.05.0$127.54.5Determine the following for each policy:Expected rate of return on stockholders? equityNet working capital positionCurrent ratio


Paper#49203 | Written in 18-Jul-2015

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