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Zorn Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm's annual sales are expected to total $4,400,000, its

image text in transcribed Zorn Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm's annual sales are expected to total $4,400,000, its fed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is so%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 25 Under a relaxed policy its total assets turnover will be If the firm adopts a restricted policy, how much lower would its interest expense be than under the relaxed policy? Do not round intermediate calculations O a $24,000 O b. $7.200 Oc$6.000 O d. $14,400 e. $12,000

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