(20 pts) 1. Lopez Corporation is considering whether to pursue an aggressive or conservative current asset policy, as well as an aggressive or conservative financing policy. The following information is available: Annual sales are $40,000,000. Fixed assets are $20,000,000. The debt ratio is 60 percent. EBIT is $4,000,000. Tax rate is 20 percent. With an aggressive policy, current assets will be 40 percent of sales; with a conservative policy, current assets will be 60 percent of sales. With an aggressive financing policy, short-term debt will be 60 percent of the total debt; with a conservative financing policy, short-term debt will be 10 percent of the total debt. Interest rate for short-term debt is 5 percent. Interest rate for long-term debt is 9 percent. Required: a) Determine the return on equity for the aggressive approach and for the conservative approach. b) Discuss which approach you would choose.