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Return on Investment under different current asset policies

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ABC is attempting to establish a current assets policy. Fixed assets are $600,000 and the firm plans to maintain a 50% debt ratio. ABC has on operating current liabilities the interest rate on debt is 10%. There alternative current asset polices are under consideration: 40%.50% and 60% on sales. The company expects to earn 15% before interest and taxes on sales of $3milion. The tax rate is 40%. What is the ROI under each alternative?

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The answer contains the computation of Return on investment under different current asset policies.

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Return on investment or Dupont ratio Net income/
Total assets

40% 50% 60%
EBIT ...

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