(Solved) : Current Assets Investment Policy Rentz Corporation Investigating Optimal Level Current Ass Q33063535 . . . .

CURRENT ASSETS INVESTMENT POLICY

Rentz Corporation is investigating the optimal level of currentassets for the coming year. Management expects sales to increase toapproximately $2 million as a result of an asset expansionpresently being undertaken. Fixed assets total $2 million, and thefirm plans to maintain a 50% debt-to-assets ratio. Rentz’s interestrate is currently 8% on both short-term and long-term debt (whichthe firm uses in its permanent structure). Three alternativesregarding the projected current assets level are underconsideration: (1) a restricted policy where current assets wouldbe only 45% of projected sales, (2) a moderate policy where currentassets would be 50% of sales, and (3)