Lester Food Corp. has $4,500,000 in assets (Temporary Current Assets = $1.000,000; Permanent Current Assets=$1,500,000; Fixed Assets = $2,000,000). Short-term rafes are 8%. Long-term'rates are 13%. The CEO of Lester FoodCorp would like to know how much they will save on interest (if any) if they use an optimal approach to financing theassels (long-term financing will be used for fixed and permanent current assets, and the rest of assets will be financedwith short-term financing); if they take the ultra conservative approach 85% of total assets will be financed withlong-term funds, and the rest with short term funds.a. Calculate the total cost of financing for both plans.b. Which one is better for Lester Food Corp?

Answer rating: 100% (QA)

a Lets calculate the total cost of financing for both plans 1 Optimal approach Shortter... View the full answer