a) Discuss the following principles of Corporate Governance, namely Transparency, Judgement and Reputation. (6 marks) (b) McBain's Corporation is attempting to determine the optimal level of current assets for the coming year. Management expects sales to increase to approximately $3 million as a result of an asset expansion presently being undertaken. Fixed assets total $ 1 million, and the firm wants to maintain a 40 percent equity ratio. McBain's Interest cost is currently 6% on both short-term and long-term debt. Three alternatives regarding the projected current assets level are available to the firm: L. A tight policy requiring current assets of only 45 percent of projected sales; II. A moderate policy of 50 percent of sales in current assets, and III. A relaxed policy requiring current assets of 60 percent of sales. The firm expects to generate earnings before interest and taxes at a rate of 12 percent of total sales. Required: (1) What is the expected return on equity under each current assets level? (assume a 40 percent effective federal tax rate). (12 marks)