Multi-Part 16-1: Zorn Corporation is deciding whether to pursue a restricted or

Question

Multi-Part 16-1:
Zorn Corporation is deciding whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2.

Refer to Multi-Part 16-1. If the firm adopts a restricted policy, how much lower would its interest expense be than under the relaxed policy?
Answer $8,418
$8,861
$9,327
$9,818

Explanation / Answer

$9,327

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.