The Calgary Company is attempting to establish a current assets policy. Fixed assets are

$600,000, and the firm plans to maintain a 50 percent debt-to-assets ratio. The interest rate is 10 percent on all debt. Three alternative current asset policies are under consideration: 40, 50, and 60 percent of projected sales. The company expects to earn 15 percent before interest and taxes on sales of $3 million. Calgary's effective federal-plus-state tax rate is 40 percent. What is the expected return on equity under each alternative?

AppendixLO1