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c. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long- term interest rates were reversed? Conservative Aggressive Total interest Earnings after taxes

c. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long- term interest rates were reversed? Conservative Aggressive Total interest Earnings after taxes

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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c. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long- term interest rates were reversed? Conservative Aggressive Total interest Earnings after taxes
Transcribed Image Text:c. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long- term interest rates were reversed? Conservative Aggressive Total interest Earnings after taxes
Guardian Inc. is trying to develop an asset-financing plan. The firm has $500,000 in temporary current assets and $400,000 in permanent current assets. Guardian also has $600,000 in fixed assets. Assume a tax rate of 30 percent. a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 80 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest rate is 12 percent on long-term funds and 6 percent on short-term financing. Compute the annual interest payments under each plan. Annual Interest Conservative Aggressive b. Given that Guardian's earnings before interest and taxes are $380,000, calculate earnings after taxes for each of your alternatives. Earning After Taxes Conservative Aggressive
Transcribed Image Text:Guardian Inc. is trying to develop an asset-financing plan. The firm has $500,000 in temporary current assets and $400,000 in permanent current assets. Guardian also has $600,000 in fixed assets. Assume a tax rate of 30 percent. a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 80 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest rate is 12 percent on long-term funds and 6 percent on short-term financing. Compute the annual interest payments under each plan. Annual Interest Conservative Aggressive b. Given that Guardian's earnings before interest and taxes are $380,000, calculate earnings after taxes for each of your alternatives. Earning After Taxes Conservative Aggressive
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