Give Answer Of Accounting Question Lear Inc. has $1,020,000 in current assets, $460,000 of which are consideredpermanent current assets. In addition, the firm has $820,000 invested in fixedassets.a. Lear wishes to finance all fixed assets and half of its permanent current assetswith long-term financing costing 8 percent. The balance will be financed withshort-term financing, which currently costs 5 percent. Lear's earnings beforeinterest and taxes are $420,000. Determine Lear's earnings after taxes underthis financing plan. The tax rate is 30 percent.b. As an alternative, Lear might wish to finance all fixed assets and permanentcurrent assets plus half of its temporary current assets with long-termfinancing and the balance with short-term financing. The same interest ratesapply as in part a. Earnings before interest and taxes will be $420,000. Whatwill be Lear's earnings after taxes? The tax rate is 30 percent.

Step 1: Define Short-term loanA short-term loan is the type of loan taken by an enterprise to…

Answered: Lear Inc. has $1,020,000 in current…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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Lear Incorporated has $1,020,000 in current assets, $ 460,000 of which are considered permanent current assets. In addition, the firm has $820, 000 invested in fixed assets. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 8 percent. The balance will be financed with short-term financing, which currently costs 5 percent. Lear's earnings before interest and taxes are $420,000. Determine Lear's earnings after taxes under this financing plan. The tax rate is 30 percent. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing and the balance with short-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $420,000. What will be Lear's earnings after taxes? The tax rate is 30 percent.
Lear Incorporated has $810,000 in current assets, $355,000 of which are considered permanent current assets. In addition, the firm has $610,000 invested in fixed assets. a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 8 percent. The balance will be financed with short-term financing, which currently costs 4 percent. Lear's earnings before interest and taxes are $210,000. Determine Lear's earnings after taxes under this financing plan. The tax rate is 40 percent. Earnings after taxes b. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing and the balance with short-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $210,000. What will be Lear's earnings after taxes? The tax rate is 40 percent. Earnings after taxes
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Lear, Inc. has $1,000,000 in current assets, $430,000 of which are considered permanent current assets. In addition, the firm has $680,000 invested in capital assets. a. Lear wishes to finance all capital assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lear's earnings before interest and taxes are $280,000. Determine Lear's earnings after taxes under this financing plan. The tax rate is 30 percent. Earnings after taxes b. As an alternative, Lear might wish to finance all capital assets and permanent current assets plus half of its temporary current assets with long- term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $280,000. What will be Lear's earnings after taxes? The tax rate is 30 percent. Earnings after taxes c. Not available in Connect. $ $113400
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The Haris - Arshi Company is attempting to establish a current assets polıcy. Company has allocated $900,000 to fixed assets and the firm plans to maintain a 50 percent debt to assets a ratio. The interest rate is 10% on all debts. Company is considering three alternative current asset policies: this can be 40, 50 or 60 percent of projected sales. The company expects to earn 20 percent profit before interest and taxes on sales of $3 million. Company's effective federal-plus-state-tax rate is 15 percent. What is the expected return on equity under each alternative? Drawa descriptive conclusion for each Current ASset Investment Policy.
Peterson Packaging Corp. has $9 billion in total assets. The company’s basic earning power (BEP) ratiois 9 percent, and its times interest earned ratio is 3.0. Peterson’s depreciation and amortizationexpense totals $1 billion. It has $0.6 billion in lease payments and $0.3 billion must go towardsprincipal payments on outstanding loans and long-term debt. What is Peterson’s EBITDA coverageratio?
The Berndt Corporation expects to have sales of $12 million. Costs other thandepreciation are expected to be 75% of sales, and depreciation is expected tobe $1.5 million. All sales revenues will be collected in cash, and costs otherthan depreciation must be paid for during the year. Berndt’s federal-plusstate tax rate is 40%. Berndt has no debt.a. Set up an income statement. What is Berndt’s expected net income? Itsexpected net cash flow?
MIGHTY Corp obtained a 18 % , P 500,000, one year loan from KING Financing . Income tax is 32 %. Said amount was to finance a project with an expected return on investment of 20 % .a) Compute for the cost of borrowed capital. b) Is the use of borrowed capital advisable ? Why ?
D. Luke Company is indeed of P3,375,00 to finance its building expansion program. Luke is currently negotiating a loan with Metro Bank which requires the company to maintain a compensating balance of 5% of the loan principal on deposit in a current account at the bank. Luke Inc. currently maintains a balance P50,000 in its current account . The current account earns interest of 4% per annum; the interest rate on the loan is 12% per annum. Questions: Based on the above data, answer the following A. What is the principal amount of the loan? a. P3,375,000 b. P3,325,000 c. P3,500,000 d. P3,480,000 41 B. What is the effective interest rate on the loan a.8% c.12.30% b.12.91% d. 12%
Ohio Quarry Inc. has $20 million in assets. Its expected operating income (EBIT) is $4 million and its income tax rate is 40 percent. If Ohio Quarry finances 20 percent of its total assets with debt capital, the pretax cost of funds is 10 percent. If the company finances 40 percent of its total assets with debt capital, the pretax cost of funds is 15 percent. Round your answers to the questions below to two decimal places. Determine the rate of return on equity (ROE) under the three different capital structures (0, 20, and 40% debt ratios).0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest expected ROE? yields the highest expected ROE. Determine the ROE under each of the three capital structures (0, 20, and 40% debt ratios) if expected EBIT decreases by 40 percent.0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest ROE calculated in part c? yields the highest expected ROE.…
The Karson transport company currently has net operating income of $495,000 and pays interest expenses of $198,000. The company plans to borrow $1.02 million on which the firm will pay 12 percent interest. The borrowed money will be used to finance an investment that is expected to increase the firm’s net operating income by $397,000 a year. A. What is Karson’s time interest earned ratio before the loan is taken out and the investment is made ? The times interest ratio is Round to two decimal places.

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