FOUND.OF FINANCIAL MANAGEMENT-ACCESS
17th Edition
ISBN: 9781260519969
Author: BLOCK
Publisher: MCG
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Chapter 6, Problem 15P
Lear Inc. has
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 7 percent. Lear’s earnings before interest and taxes are
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
c. What are some of the risks and cost considerations associated with each of these alternative financing strategies?
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Domestic
Lear Incorporated has $900,000 in current assets, $400,000 of which are considered permanent current assets. In addition, the firm
has $700,000 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 5 percent. Lear's earnings before interest and taxes are
$300,000. Determine Lear's earnings after taxes under this financing plan. The tax rate is 30 percent.
Earnings after taxes
Chapter 6 Solutions
FOUND.OF FINANCIAL MANAGEMENT-ACCESS
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - “The most appropriate financing pattern would be...Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - What are three theories for describing the shape...Ch. 6 - Since the mid-1960s, corporate liquidity has been...
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