Question 7. Thank you for the help please comment if you need anything.

Guardian Inc. is trying to develop an asset-financing plan. The firm has S500,OOO in temporary current assets and S400,OOO in permanent current assets. Guardian also nas $600,000 in fixed assets. Assume a tax rate of 30 percent. a. Construct two alternative financing plans tor Guardian. One of the plans should be conservative, witn 80 percent ot assets financed by long-term sources, and the other should be aggressive, witn only 56.25 percent ot assets tinanced by long-term sources. T ne current interest rate is 12 percent on long-term funds and 6 percent on snort-term financing. Compute the annual interest payments under each plan. Annual Interest Conservative Aggressive b. Given that Guardian's earnings before interest and taxes are S380,000, calculate earnings atter taxes tor each of your alternatives. Earning After Taxes Conservative Aggressive c. What would the annual interest and earnings atter taxes tor the conservative and aggressive strategies be Ifthe snort-term and long-term interest rates were reversed? Conservative Agg ressive Total interest Earnings after taxes