Lear Incorporated has $880,000 in current assets, $390,000 of which are considered permanent current assets. In addition, the firm has $680,000 invested in fixed assets. a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 9 percent. The balance will be financed with short-term financing, which currently costs 7 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 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 $280,000. What will be Lear's earnings after taxes? The tax rate is 30 percent. Earnings after taxes
Lear Incorporated has $880,000 in current assets, $390,000 of which are considered permanent current assets. In addition, the firm has $680,000 invested in fixed assets. a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 9 percent. The balance will be financed with short-term financing, which currently costs 7 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 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 $280,000. What will be Lear's earnings after taxes? The tax rate is 30 percent. Earnings after taxes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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am. 113.
Transcribed Image Text:Lear Incorporated has $880,000 in current assets, $390,000 of which are considered permanent current assets. In addition, the firm
has $680,000 invested in fixed assets.
a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 9 percent. The
balance will be financed with short-term financing, which currently costs 7 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 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 $280,000. What will be Lear's earnings after taxes? The tax rate is 30 percent.
Earnings after taxes
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