CURRENT ASSETS INVESTMENT POLICY Calgary Company is thinking of modifying its current assets investment policy. Fixed assets are $600,000, sales are projected at $3 million, the EBIT/Sales ratio is projected at 15%, the interest rate is 10% on all debt, the federal-plusstate tax rate is 40%, and Calgary plans to maintain a 50% debt-to-assets ratio. Three alternative current assets investment policies are under consideration: 40%, 50%, and 60%

of projected sales. What is the expected return on equity under each alternative?

AppendixL01