The Cambrian Corporation is attempting to determine the optimal level of working capital for the coming year. Management expects sales to increase to approximately \$2 million because of an asset expansion presently being undertaken. Fixed assets total \$1 million, and the firm wishes to maintain a 60% debt ratio. Cambrian's interest cost is currently 8% on both short-term and longer-term debt (both of which the firm uses in its permanent capital structure). Three alternatives regarding the projected current asset level are available to the firm: (1) a tight policy requiring current assets of only 45% of projected sales, (2) a moderate policy of 50% of sales in current assets, and (3) a relaxed policy requiring current assets of 60% of sales. The firm expects to generate earnings before interest and taxes at a rate of 12% on total sales. Assume a 40% Tax Rate. Question - What alternative would you recommend and why? return on equity under each current asset level? Discuss with the help of your calculations. (4 Marks)