2. An engineering company is considering its working capital investment for the next year. Estimated fixed assets and current liabilities for the next year are respectably Rs. 2.60 crore and Rs. 2.34 crore. Sales and profit before interest and taxes (PBIT) depend on current asset investment- particularly inventories and book debts. The company is examining the following alternative working capital policies 10Marks Working Capital Policy Investment in Current Assets Estimated Sales EBIT (Rs Crore) (Rs Crore) (Rs Crore) Conservative 4.50 12.30 1.23 Moderate 3.90 11.50 1.15 Aggressive 2.60 10.00 1.00 Also assuming that the engineering firm has chosen the Conservative working capital policy (that is investment of Rs 4.50 crore in current assets). The company is now examining the use of long term and short term borrowing for financing its assets. The company will use Rs. 2.50 crore of equity funds. The corporate tax rate is last two digit of your ID percent. The company is considering the following debt alternatives: Long term debt 1.12 Financing Policy Conservative Moderate Aggressive Short term debt .54 1.00 1.50 .66 .16 The average effective interest rate on short term debt is last two digit percent while on long-term debt it is 13 percent. Determining the following for each of the financing policies with workings (a) Rate of return on total assets (6) Net working capital position (c) Current Ratio (d) Rate of return on total equity Also evaluate the return-risk tradeoffs of these policies