Jasper Enterprises follows a moderate current asset investment policy, but it is now considering whether to shift to a restricted or perhaps to a relaxed policy. The firms annual sales are $400,000, its fixed assets are $100,000, its target capital structure calls for 50% debt and 50% equity, its EBIT is $35,000, the interest rate on its debt is 10%, and its tax rate is 40%. With a restricted policy, current assets will be 10% of sales, while under a relaxed policy they will be 20% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?

.

4.3%

b.	5.3%
c.	4.7%

d.

6.67