Under normal conditions (65% probability), Plan A will produce $32,000 higher return than Plan B. Under tight money conditions (35% probability), Plan A will produce $120,000 less than Plan B. What is the expected value of returns? (Amounts in parentheses indicate negative value.)

Multiple Choice

• ($21,200)

• $20,800

• $62,800

• ($42,000)

Permanent current assets are not a factor in a manager's decision-making process when all current assets will be

Multiple Choice

• financed by short-term debt.

• long-term in nature.

• self-liquidating.

• internally financed.

Riley Co. is considering a short-term or long-term financing plan for $4,000,000 in assets. They expect the following one-year rates over the next three years: 6.5%, 7.75%, and 9%. Their long-term interest rate will be 7.5% for the three years. Assuming the rates follow their expectations, what will be the difference in interest costs over the three years?

Multiple Choice

• Long-term interest will be $30,000 more than short-term interest.

• Long-term interest will be $30,000 less than short-term interest.

• Long-term interest will be $140,000 less than short-term interest.

• None of the options