The balance sheet for Agro Inc. shows current assets of $650,000 and capital assets of $1,200,000....

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The balance sheet for Agro Inc. shows current assets of $650,000 and capital assets of $1,200,000. Of the current assets, $300,000 can be considered permanent with the remainder being temporary. Agro is considering two different financing strategies for its assets: 1. All of the capital assets and half of the permanent current assets will be financed through long term debt at a rate of 8%. The remaining current assets will be financed with short term debt at a rate of 6%. All of the capital assets and all of the permanent current assets will be financed through long term debt at a rate of 8%. The temporary current 2. assets will be financed with short term debt at a rate of 6%. Assuming that Agro will have earnings before interest and taxes of $400,000 and that Agro is subject to an effective tax rate of 40%, determine the earnings after taxes for each of the strategies. Which of the two would be considered the more aggressive strategy? (provide a reason) The balance sheet for Agro Inc. shows current assets of $650,000 and capital assets of $1,200,000. Of the current assets, $300,000 can be considered permanent with the remainder being temporary. Agro is considering two different financing strategies for its assets: 1. All of the capital assets and half of the permanent current assets will be financed through long term debt at a rate of 8%. The remaining current assets will be financed with short term debt at a rate of 6%. All of the capital assets and all of the permanent current assets will be financed through long term debt at a rate of 8%. The temporary current 2. assets will be financed with short term debt at a rate of 6%. Assuming that Agro will have earnings before interest and taxes of $400,000 and that Agro is subject to an effective tax rate of 40%, determine the earnings after taxes for each of the strategies. Which of the two would be considered the more aggressive strategy? (provide a reason)

Answer rating: 100% (QA)

Solution First of all we must calculate the short term current assets and total long term assets as ... View the full answer