Lear Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 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 $200,000. 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 inferest and taxes will be $200,000. What will be Lear's earnings after taxes? The tax rate is 30 percent. Earnings after taxes c. This part of the question is not part of your Connect assignment.
Lear Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 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 $200,000. 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 inferest and taxes will be $200,000. What will be Lear's earnings after taxes? The tax rate is 30 percent. Earnings after taxes c. This part of the question is not part of your Connect assignment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lear Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has
$600,000 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 $200,000. 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 inferest and taxes will be $200,000. What will be
Lear's earnings after taxes? The tax rate is 30 percent.
Earnings after taxes
c. This part of the question is not part of your Connect assignment.
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