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Laserscope Inc. is trying to determine the best combination of short-term and long-term debt to employ...

Laserscope Inc. is trying to determine the best combination of short-term and long-term debt to employ in financing its assets. Laserscope will have $16 million in current assets and $20 million in fixed assets next year and expects operating income (EBIT) to be $4,1 million. The company's tax rate is 40% and its debt ratio is 50%. The firm's debt will be financed by an conservative policy using $6 million of short-term debt. The short-term interest rate is 7.0% and the long-term interest rate is 10.3%. What is the return on shareholders' equity (ROE) under this policy?

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