Jarrett Enterprises Is Considering Whether to Pursue a Restricted or Relaxed

question 49

Multiple Choice

Jarrett Enterprises is considering whether to pursue a restricted or relaxed current asset investment policy.The firm's annual sales are R400,000; its fixed assets are R100,000; debt and equity are each 50 percent of total assets.EBIT is R36,000, the interest rate on the firm's debt is 10 percent, and the firm's tax rate is 40 percent.With a restricted policy, current assets will be 15 percent of sales.Under a relaxed policy, current assets will be 25 percent of sales.What is the difference in the projected ROEs between the restricted and relaxed policies?

• A) 0%; the ROE's are equal.
• B) 6.2%
• C) 5.4%
• D) 1.6%
• E) 3.8%

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Definitions:

T Lymphocytes

A type of white blood cell crucial for immune response, involved in identifying and eliminating pathogens.

Bacterial Infections

Illnesses caused by harmful bacteria that invade the body, leading to a wide range of symptoms depending on the area affected.

Viral Infections

Viral infections occur when viruses enter and multiply in the living cells of a host, potentially causing a wide range of health problems.

Macrophages

A kind of leukocyte that consumes and breaks down cellular waste, foreign materials, microorganisms, and cancerous cells through a mechanism known as phagocytosis.