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Sagot :
Answer:
Times Inc.
Conservative Aggressive
a) Annual interest payments $207,360 $184,275
b) Earnings After Taxes $127,584 $141,475
c) Annual interest payments $149,040 $172,125
Earnings After Taxes $162,576 $148,725
Explanation:
a) Data and Calculations:
Temporary current assets = $540,000
Permanent current assets = 440,000
Fixed assets = 640,000
Total assets = $1,620,000
Assumed tax rate = 40%
Conservative Aggressive
Financed by long-term sources 80% 56.25%
Long-term finance $1,296,000 $911,250
Short-term finance 324,000 (20%) 708,750 (43.75%)
Annual interest payments:
Long-term interest rate = 14% $181,440 $127,575
Short-term interest rate = 8% 25,920 56,700
Total annual interest payments $207,360 $184,275
b) Earnings before
interest and taxes $420,000 $420,000
Annual interest payments 207,360 184,275
Earnings before taxes $212,640 $235,725
Income taxes (40%) 85,056 94,250
Earnings After Taxes $127,584 $141,475
Annual interest payments:
Long-term interest rate = 8% $103,680 $72,900
Short-term interest rate = 14% 45,360 99,225
Total annual interest payments $149,040 $172,125
c) Earnings before
interest and taxes $420,000 $420,000
Annual interest payments 149,040 172,125
Earnings before taxes $270,960 $247,875
Income taxes (40%) 108,384 99,150
Earnings After Taxes $162,576 $148,725
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