Wright Company has long-term assets of $21 million and common shareholder's equity of $15 million on it books thus requiring $35 million in short and/or long-term debt financing. Forecasted sales for next year are $200 million and expected EBIT profit margin is 5%. Interest rates on the company's short-term and long-term debt are 8% and 10%, respectively. Wright Company is considering an aggressive plan of debt financing consisting of $25 million in short term debt and $10 million in long-term debt.;Assuming a tax rate of 40%, what is the expected rate of return on common equity, net working capital position and current ratio?
How to figure expected rate of return on common equity, net working capital position and current ratio
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