Lear Inc. has $920,000 in current assets, of which $410,000 is considered permanent current assets. In addition, the company has $720,000 invested in fixed assets. to. Lear wants to finance all of his fixed assets and half of his permanent current assets with long-term financing that costs 10 percent. The balance will be financed with short-term financing, which currently costs 7 percent. Lear's earnings before interest and taxes are $320,000. Determine Lear's after-tax earnings under this financing plan. The tax rate is 30 percent.

PROFITS AFTER TAXES:

b. Alternatively, Lear might want to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing and the rest with short-term financing. The same interest rates are applied as in part a. Earnings before interest and taxes will be $320,000. What will Lear's earnings be after taxes? The tax rate is 30 percent.

PROFITS AFTER TAXES:

Answer rating: 100% (QA)

a To determine Lears aftertax earnings under this financing plan we need to calculate the interest expense and subtract it from the earnings before in... View the full answer