6-7. Continued Solution: Stratton Health Clubs. Inc. a. Most aggressive ow liquidity/high return $3,000,000x20%=$600,000 Short-term financing 3000,000x10%=-300000 Anticipated return $300.000 b. Most conservative High liquidity/low return $3.000.000x13%=$390000 Long-term financing 3.000.000x12%=-360.000 Anticipated return $300 c. Moderate approach Low liquidity $3,000.000x20%=$600.000 Long-term financing 3.000.000x12%=-360.000 $240.000 High liquidity $3,000.000x13%=$390,000 Short-term financing 3000,000×10% 300.000 $90.000 d. You may not necessarily select the plan with the highest return You must also consider the risk inherent in the plan. Of course, some firms are better able to take risks than others The ultimate concern must be for maximizing the overall valuation of the firm through a judicious consideration of risk-return options CopyrightC 2005 by The McGray-Hill Companies, Inc. S-220Copyright © 2005 by The McGraw-Hill Companies, Inc. S-220 6-7. Continued Solution: Stratton Health Clubs, Inc. a. Most aggressive Low liquidity/high return $3,000,000 x 20% = $600,000 Short-term financing –3,000,000 x 10% = –300,000 Anticipated return $300,000 b. Most conservative High liquidity/low return $3,000,000 x 13% = $390,000 Long-term financing –3,000,000 x 12% = –360,000 Anticipated return $ 30,000 c. Moderate approach Low liquidity $3,000,000 x 20% = $600,000 Long-term financing –3,000,000 x 12% = –360,000 $240,000 Or High liquidity $3,000,000 x 13% = $390,000 Short-term financing –3,000,000 x 10% = –300,000 $ 90,000 d. You may not necessarily select the plan with the highest return. You must also consider the risk inherent in the plan. Of course, some firms are better able to take risks than others. The ultimate concern must be for maximizing the overall valuation of the firm through a judicious consideration of risk-return options