Question

short term financing?

Assume that Hogan Surgical Instruments co. has $2,000,000 in assets. If its 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, and with a long-term financing plan, the financing costs on the $2,000,000 will be 12 percent. (Review Table 6-11 for parts a, b, and c of this problem. which is attached in the Word document)

a. compute the anticipated return after financing costs with the most agressive 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.

d. Would you necessarily accept the plan with the highest return after financing costs? Briefly explain.

3 years ago - 1 answers

Best Answer

Chosen by Asker

Since they have 2mil in assets, they should also have at least one accountant. You pay the accountant . . . let the accountant run the numbers for you.

3 years ago