Assume that Atlas Sporting Goods Inc. has $810,000 in assets. Ifit goes with a low-liquidity plan for the assets, it can earn areturn of 12 percent, but with a high-liquidity plan the returnwill be 9 percent. If the firm goes with a short-term financingplan, the financing costs on the $810,000 will be 6 percent, andwith a long-term financing plan the financing costs on the $810,000will be 7 percent.

a. Compute the anticipated return afterfinancing costs with the most aggressive asset-financing mix.

b. Compute the anticipated return after financingcosts with the most conservative asset-financing mix.

c. Compute the anticipated return after financingcosts with the two moderate approaches to the asset-financingmix.

d. If the firm used the most aggressiveasset-financing mix described in part a and had theanticipated return you computed for part a, what wouldearnings per share be if the tax rate on the anticipated return was30 percent and there were 20,000 shares outstanding? (Roundyour answer to 2 decimal places.)

e-1. Now assume the most conservativeasset-financing mix described in part b will be utilized.The tax rate will be 30 percent. Also assume there will only be5,000 shares outstanding. What will earnings per share be?(Round your answer to 2 decimal places.)

e-2. Would the conservative mix have higher orlower earnings per share than the aggressive mix?

• Lower

• Higher