A firm needs $1.2 million in additional funds. These can be borrowed from a commercial bank with a loan at 7 percent for one year or from an insurance company at 9 percent for six years. The tax rate is 30 percent. What will be the firm's earnings under each alternative if earnings before interest and taxes (EBIT) are $415,000? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 5 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 13 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $

A firm needs $1.2 million in additional funds. These can be borrowed from a commercial bank with a loan at 7 percent for one year or from an insurance company at 9 percent for six years. The tax rate is 30 percent. What will be the firm's earnings under each alternative if earnings before interest and taxes (EBIT) are $415,000? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 5 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 13 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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