Need assistance with answering the attached question. If possible, please show all calculations.

_ Pmblelll 16-13 Current Asset Usage Policy Payne Products' sala last year were an anemic $3.2 million. but with an improved product mix it expects sales growth to be 25% this year. and Payne would like to determine the effect of various current assets policia on its financial performance. Payne has $3 million of xed assets and intends to loeep its debt ratio at its historical level of 50%. Payne's debt interest rate is currently 9%. You are to evaluate three different current asset policia: [1) a ratricted policy in which current assets are 45% of projected salar [2] a moderate policy with 50% of sala tied up in current assets, and (3] a relaxed policy requiring current assets of 60% of sala. Eamings beFore interat and lama is expected to be 13% of sala. Payne's tax rate is 40%. a. What is the expected retum on equity under each current asset level? Round your answers to two decimal placE. Tlght policy I I % Moderate policy | | M. Relaxed policy I I % b. In this problem we have assumed that the level of expected sales is independent of current asset policy. 15 this a valid assumption? 1. Y5, this assunution would probably be valid in a real world situation. A iirrn's current asset policia have no signiant effect on sales. 11. No, this assumption would probably not be valid in a real world situation. A firrn's cun'ent asset policia may have a signifiant effect on sales. 111. The current asset policies followed by the firm mainly inuence the level of long-term debt used by the firm. IV. The current asset policiE Followed by the firm mainly inuence the level of iixied assets. V. Sales are oont'olled only by the degree of marketing eFfort the fim1 usar irrespective of H1e current asset policia it employs. Why or why not? The input in the box below will not be graded. but may be reviewed and oonsidered by your instructor. blank c. How would the overall rislcinas of the rm vary under each policy? The input in the box below will not be graded. but may be reviewed and oonsidered by your instructor. blank