A company is deciding its working capital policy, based on which policy generates the highest return on equity. Under a restricted policy, current assets will equal 40% of sales, which are projected to be $5 million. Under a moderate policy, current assets will equal 50% of sales, which are projected to be $5.5 million. Under a relaxed policy, current assets will equal 60% of sales, which are projected to be $6.5million. Fixed assets will equal 3 million, the companys debt ratio will be 40%, earnings before interest and taxes will be 20% of sales, and the interest rate on the companys debt will be 7% per year, regardless of which working capital policy is selected. If the companys tax rate is35%, what is the return on equity under the best working capital policy?

a. 15.0%

b. 17.7%

c. 20.0%

d. 18.6%

e. 17.4%