The Alpha Beta Company is attempting to establish a current assets policy. Fixed assets are $700,000, and the firm plans to maintain a 40% debt-to-assets ratio. Alpha Beta has no operating current liabilities. The interest rate is 12% on all debt. Three alternative current asset policies are under consideration: 30%, 40%, and 70% of projected sales. The company expects to earn 18% before interest and taxes on sales of $5 million. Alpha Betas effective federal-plus-state tax rate is 30%. What is the expected return on equity under each asset policy?

1. Kareem & Sons last year reported sales of 12 million and an inventory turnover ratio of 4. The company is now adopting a new inventory system. If the new system is able to reduce the firms inventory level and increase the firms inventory turnover ratio to 8 while maintaining the same level of sales, how much cash will be freed up?
2. Medwing Corporation has a DSO of 19 days. The company averages 5,500 in credit sales each day. What is the companys average accounts receivable.