document.write( "Question 158200: Scott Equipment Organization is investigating the use of various combinations of short term and long-term debt in financing its assets. Assume that the organization has decided to employ $30 million in current assets, along with $35 in fixed assets, in the operations next year. Given the level of current assets, anticipated sales adn Earnings Before Interest and Taxes (EBIT) for next year are $60 million and $6 million, respectively. The organizations income tax rate is 40%; Stockholders equity will be used to finance $40 million of its assets, with the remainder being financed by short-term and long-term debt. Scott's is considering implementing one of the following financing policies: \r \n" );
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document.write( "Amount of Short-Term Debt \n" );
document.write( "Financial Policy In Mil. LTD% STD% \n" );
document.write( "Aggressive (large amount) $24 8.5 5.5 \n" );
document.write( "Moderate (moderate amount) 18 8.0 5.0 \n" );
document.write( "Conservative (small amount) 12 7.5 4.5 \r \n" );
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document.write( "A) Determine the following for each of the financing policies: \n" );
document.write( " 1) Expected rate of return on stockholders equity \n" );
document.write( " 2) Net working capital position \n" );
document.write( " 3) Current ratio \n" );
document.write( "B) Evaluate the profitability versus risk trade-offs of these three \n" );
document.write( " policies. Would you rate each one \"low\", \"medium\", or \"high\" \n" );
document.write( " with respect to profitability? Would you rate \n" );
document.write( " each \"one\"low\", \"medium\", or \"high\" with respect to risk? \n" );
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