Cisco Systems wishes to analyze the joint impact of its working capital investment and financing policies on shareholder return. The company has $24 million in fixed assets. Cisco wishes to maintain a debt ratio of 40%. The company's tax rate is also 40%. The following information was developed for the two policies under consideration (dollars in millions):
For the aggressive approach, Cisco's ROE is ____ and for the conservative approach the ROE is ____.

Question

Cisco Systems wishes to analyze the joint impact of its working capital investment and financing policies on shareholder return. The company has $24 million in fixed assets. Cisco wishes to maintain a debt ratio of 40%. The company's tax rate is also 40%. The following information was developed for the two policies under consideration (dollars in millions): 
For the aggressive approach, Cisco's ROE is ____ and for the conservative approach the ROE is ____.

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Solution:
 11ea10f6_a16c_2640_b6b3_057ce42ca233_TB2040_00

Cisco Systems Wishes to Analyze the Joint Impact of Its