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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 s2, foo,

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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 s2, foo, ooo, its fixed assets turnover ratio equals 50, and its debt and common equity are each 50% of total assets. EBIT is $208, 000 , the interest rate on the firm's debt is 9%, and the tux rate is 40%. If the company follows a restricted policy, its total assets tumover will be 25 . Under a relaxed policy its total assets turnover will be 2.0. Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10\%s, but its total aisets tumover, debt ratio. interest , and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies? Do not round Imrermediate calculations. a. 5.51 p.p. b. 3.41 p.p. c. 8.16pp. d. 5.20p.p. e. 6.73 p.p

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