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show all calculations Citytown Corporation has a moderate working capital (current asset) investment policy. Now, the company may want to change the policy to a

show all calculations
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Citytown Corporation has a moderate working capital (current asset) investment policy. Now, the company may want to change the policy to a more restricted or maybe to a somewaht relaxed policy. The compeny's sales revenue, fixed assets operating income (EBIT) are 5500,000 , $120,000, and $40,000, respectively, the interest rate on the debt and tax rate are 10% and 25%. Citytown Corporation maintains its optimal Debt/Equity ratio of (40/60). Under a more restricted policy, its current assets will be 10% of sales revenue, while with a relaxed policy its current assets will have 30% of sales revenue. Compute the ROEs under the two different policies. Which policy would bring a hisher AOF? "ROE-Net income/tquity

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