Question

Assume that Hogan Surgical Instruments Co. has $3,800,000 in assets. If it goes with a low-liquidity...

Assume that Hogan Surgical Instruments Co. has $3,800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 16 percent, but with a high-liquidity plan, the return will be 12 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,800,000 will be 8 percent, and with a long-term financing plan, the financing costs on the $3,800,000 will be 10 percent.

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.

b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.

c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume that Hogan Surgical Instruments Co. has $3,800,000 in assets. If it goes with a low-liquidity...
Assume that Hogan Surgical Instruments Co. has $3,800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 16 percent, but with a high-liquidity plan, the return will be 12 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,800,000 will be 8 percent, and with a long-term financing plan, the financing costs on the $3,800,000 will be 10 percent. a. Compute the anticipated return after...
Assume that Hogan Surgical Instruments Co. has $2,200,000 in assets. If it goes with a low-liquidity...
Assume that Hogan Surgical Instruments Co. has $2,200,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan, the return will be 11 percent. If the firm goes with a short-term financing plan, the financing costs on the $2,200,000 will be 7 percent, and with a long-term financing plan, the financing costs on the $2,200,000 will be 9 percent. a. Compute the anticipated return after...
Assume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low-liquidity...
Assume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 14 percent, but with a high-liquidity plan, the return will be 10 percent. If the firm goes with a short-term financing plan, the financing costs on the $4,100,000 will be 6 percent, and with a long-term financing plan, the financing costs on the $4,100,000 will be 8 percent. a. Compute the anticipated return after...
Assume that Hogan Surgical Instruments Co. has $3,500,000 in assets. If it goes with a low-liquidity...
Assume that Hogan Surgical Instruments Co. has $3,500,000 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 $3,500,000 will be 10 percent, and with a long-term financing plan, the financing costs on the $3,500,000 will be 12 percent. a. Compute the anticipated return after...
Assume that Atlas Sporting Goods Inc. has $1,050,000 in assets. If it goes with a low-liquidity...
Assume that Atlas Sporting Goods Inc. has $1,050,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan the return will be 12 percent. If the firm goes with a short-term financing plan, the financing costs on the $1,050,000 will be 9 percent, and with a long-term financing plan, the financing costs on the $1,050,000 will be 10 percent. a. Compute the anticipated return after...
Assume that Atlas Sporting Goods Inc. has $1,020,000 in assets. If it goes with a low-liquidity...
Assume that Atlas Sporting Goods Inc. has $1,020,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 12 percent, but with a high-liquidity plan the return will be 9 percent. If the firm goes with a short-term financing plan, the financing costs on the $1,020,000 will be 6 percent, and with a long-term financing plan the financing costs on the $1,020,000 will be 7 percent. a. Compute the anticipated return after...
Medical Equipment of Orlando Inc. trying to develop an asset-financing plan. The firm has $2,800,000 in...
Medical Equipment of Orlando Inc. trying to develop an asset-financing plan. The firm has $2,800,000 in temporary current assets and $1,200,000 in permanent current assets. The company also has $6,000,000 in fixed assets. Part A Construct two alternative financing plans for Medical of Orlando Inc. One of the plans should be conservative, with 80 percent of assets financed by long-term sources and the rest financed by short-term sources. The other plan should be aggressive, with only 20 percent of assets...
How do you figure out what Conservative and Aggressive amounts will be? I can not ind...
How do you figure out what Conservative and Aggressive amounts will be? I can not ind anythng in my tet book that delves into this enough. Thank you. Guardian Inc. is trying to develop an asset-financing plan. The firm has $400,000 in temporary current assets and $300,000 in permanent current assets. Guardian also has $500,000 in fixed assets. Assume a tax rate of 40 percent. a. Construct two alternative financing plans for the firm. One of the plans should be...
Sherlock Homes, a manufacturer of low cost mobile housing, has $5,000,000 in assets.      Temporary current...
Sherlock Homes, a manufacturer of low cost mobile housing, has $5,000,000 in assets.      Temporary current assets $2,000,000   Permanent current assets 1,550,000   Capital assets 1,450,000      Total assets $5,000,000        Short-term rates are 10 percent. Long-term rates are 15 percent. (Note that long‐term rates imply a return to any equity). Earnings before interest and taxes are $1,060,000. The tax rate is 20 percent. If long-term financing is perfectly matched (hedged) with long-term asset needs, and the same is true...
Sherlock Homes, a manufacturer of low cost mobile housing, has $5,000,000 in assets.      Temporary current...
Sherlock Homes, a manufacturer of low cost mobile housing, has $5,000,000 in assets.      Temporary current assets $2,000,000   Permanent current assets 1,550,000   Capital assets 1,450,000      Total assets $5,000,000        Short-term rates are 10 percent. Long-term rates are 15 percent. (Note that long‐term rates imply a return to any equity). Earnings before interest and taxes are $1,060,000. The tax rate is 20 percent. If long-term financing is perfectly matched (hedged) with long-term asset needs, and the same is true...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT