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10) Assume ABC Corporation has $2,000,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 18

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10) Assume ABC Corporation has $2,000,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 18 percent, but with a high-liquidity plan, the return will be 14 percent. If the firm goes with a short- term financing plan, the financing costs on the $2,000,000 will be 10 percent;with a long-term financing plan, the financing costs on the $2,000,000 will be 12 percent. (Review Table 6-11 for parts a, b, and c of this problem.) a) Compute the anticipated return after financing costs on the most aggressive asset-financing mix. b) Compute the anticipated return after financing costs on the most conservative asset-financing mix. c) Compute the anticipated return after financing costs on the two moderate approaches to the asset- financing mix. d) Would you necessarily accept the plan with the highest return after financing costs? Briefly explain. Maybe, maybe not, risk has to be considered, the aggressive plan is also the risklest, so if something goes wrong it could be lead to problems quicker, for example if the return isn't as high as expected, you may not be able to pay the short-term loan in time, which could lead to bankruptcy

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