Alternative Loans Plans Overview Essay

January 9, 2010

FIN/200

Option Financing Strategies

14. Lear, Inc. offers $800, 500 in current assets, $350, 000 which are considered permanent current possessions. In addition , the firm has $600, 1000 invested in set assets.

a. Lear wishes to finance every fixed property and half of its long term current resources with long term financing being 10 percent. Short- term auto financing currently costs 5 percent. Lear's earnings before interest and taxes are $200, 1000. Determine Lear's earning following taxes below this financing plan. The tax rate is 30 %. First, I can find the interest expense in both short- and long- term financial loans. So , My spouse and i subtract long lasting assets by current possessions to obtain temporary current assets that i use to find out the short- term curiosity expense: hundreds of dollars, 000- $350, 000= $450, 000.

Short- term interest expense=. 05$450, 000+ 12$350, 000=00)- term interest expense=. 05($450, 500 + property to acquire temporary current assets which I use to figure out the short- term in. 05$450, 000+$175, 000=. 05$625, 000=$31, 250

Long- term interest expense=. 10$600, 000+ 12$350, 000=. 10$600, 000+$175, 000=. 10$775, 000=$77, 500 Then, My spouse and i add the short- and long- term interest: $31, 250 + $77, 500= $108, 750. Earnings just before interest and taxes | $200, 1000

Interest expenses| 108, 750

Earnings prior to taxes| 91, 250

Taxes (30%)| 27, 375

Revenue after taxes| $63, 875

b. As an alternative, Lear might wish to finance most fixed resources and permanent current property plus 50 % of its non permanent current possessions with long- term funding. The same interest rates apply as in part a. Earnings ahead of interest and taxes will probably be $200, 000. What will become Lear's earnings after fees? The duty rate is 30 percent. That one is similar to part a, thus first Need to calculate the eye expense to get short- and long- term loans for any assets. Short- term fascination expense:. 0512$450, 000=. 05$225, 000=$11, two hundred fifty Long-term interest expense:. 10$600, 00+$350, 000+ 12$450, 000=...



Ten Pc Scientists and Different Types of Programming Terminology Essay

Related

Category

News