Assume Hogan Surgical Instruments Company has $2,000,000 in assets. If it goes with a low-liquidity plan for
Question:
Assume Hogan Surgical Instruments Company 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 $2,000,000 will be 12 percent. (ReviewTable 6-11for partsa,b, andcof this problem.)
a.Compute the anticipated return after financing costs on the most aggressive asset-financing mix.
Anticipated return$
b.Compute the anticipated return after financing costs on the most conservative asset-financing mix.
Anticipated return$
c.Compute the anticipated return after financing costs on the two moderate approaches to the asset-financing mix.
Anticipated returnLow liquidity$High liquidity$