Guardian Inc us trying to develop an asset-financing plan. The firm has $400,000 tenporary current assets and 300,000 in permanent current assets. Guardian also has $500,000 in fixed assets. Assume a tax rate od 40 percent.

a. Constrct two alternative financing plans for Guardian. One of the plans should be conservative, with 75 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed financed bt lond-term sources. The current interest rate is 15 percent on long-term funds and 10 percent on short- term financing.

b. Given the Guardian's earnings before interest interest and taxes are $200,000, calcute earnings after taxes fir each of your alternatives.

c. What would happen if the short-and long-term rates were reverses?