Guardian Incorporated is trying to develop an asset$-$financing plan. The firm has $$520,000$ in temporary current assets and $$420,000$ in permanent current assets. Guardian also has $$620,000$ in fixed assets. Assume a tax rate of $25$ percent.

Construct two alternative financing plans for Guardian. One of the plans should be conservative, with $60$ percent of assets financed by long$-$term sources, and the other should be aggressive, with only $56\mathrm{.}25$ percent of assets financed by long$-$term sources. The current interest rate is $13$ percent on long$-$term funds and $8$ percent on short$-$term financing. Compute the annual interest payments under each plan.

Given that Guardian$$s earnings before interest and taxes are $$400,000,$ calculate earnings after taxes for each of your alternatives.

What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short$-$term and long$-$term interest rates were reversed?