Assume the only assets and liabilities are those mentioned below. Superior Brands Inc. wishes to analyze the joint impact of its working capital investment and financing policies on shareholder return and risk. The company has $40 million in fixed assets. Also, the firm's financial structure consists of short-term and long- term debt and common equity. Superior wishes to maintain a debt-to-total assets ratio of 50 percent, where debt consists of both short-term and long-term sources. The company's tax rate is 40 percent. The following information was developed for three different policies under consideration: 536 Interest Working Capital Investment la Amount of Sbort Projected Sales EBIT Rate Investment and Financing Current Assets Term Debt Un millions of in millions Policy (in million (in millions of dollars) of dollars) LTD STD dollars) dollars) (%) Aggressive 556 548 $118 $11.8 9.5 6.5 Moderate $60 $120 $12.0 9.0 60 Conservative $64 524 $122 512.2 8.5 5.5 First Determine the financial structure + EAT for each plan. Then, a) Determine the following for each of the three working capital investment and financing policies: i) ii) Expected rate of return on assets. Current ratio. b) Evaluate the risk/return trade-offs associated with these three policies. ENE 121