Finance
posted by Renee .
Lear, Inc. has $800,000 is current assets, $300,000 of which are considered permanent current assets.
In addition, the firm has $600,000 in fixed assets.
A. Lear wishes to finance all fixed assets and half of its permanent current assets with longterm financing costing 8%.
B. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with longterm financing.
The same interest rates apply as in part a. Earnings before interest and taxes will be $250,000.
What will be Lear's earnings after taxes? The tax rate is 40&.
C. What are some of the risks and cost considerations associated with each of these alternative financing strategies?
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