Based on the following scenario, complete the calculations below:

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 employee $30 million in current assets, along with cl $35 million in fixed assets, in its operations next year. Given the level of current assets, anticipated sales and Earnings before interest and taxes (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 its assets, with the remainder being financed by short term and long-term debt. Scotts is considering implementing one of the following financing policies:

A. Determine the following for each of the financing policies:
1) Expected rate of return on stockholders' equity
2) Networking capital position
3) Current ratio
B. Evaluate the profitability versus risk trade-offs of these three policies. Would you rate each one "low", "medium" or "high" with respect to profitability? Would you rate each one "low", "medium", or "high" with respect torisk?

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Financial Policy In mil. | LTD (00) | STD (%) Aggressive (large amount of short term debt) S24 Moderate (moderate amount of short term debt S18 Conservative (small amount of short term debt) S12