ASF & Company is planning to introduces a new line of product that would involve increasing its current assets by 25% its existing assets structures is ( 05 marks )
Current Assets 35
Fixed assets 55
Total assets 90
A/c payable 09
Accrued wages 06
Long term debts 9% 15
Equity 60
To fulfill the finance amount ASF & Company will have to be raised by borrowing on a bank credit line at 10% interest rate or borrowing on a 10 year note from an insurance company at 12% interest rate after the new line of product company operating expense will be 30 million which is 10% of total sales and Ebit is 20% of total sales with tax rate of 45%
Required
Considering three alternative for financing working capital requirement find out ROE which alternative would be best
