Complete Problem 14 on p. 184.
14. Lear, Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 invested in fixed assets. a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lear’s earnings before interest and taxes are $200,000. Determine Lear’s earnings after taxes under this financing plan. The tax rate is 30 percent. Answer: Earnings after taxes is $23,875

b. As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $200,000. What will be Lear’s earnings after taxes? The tax rate is 30 percent. Answer: Earnings after taxes is $49,875

c. What are some of the risks and cost considerations associated with each of these alternative financing strategies? Answer: Short term rates are more volatile than long term. Volatility is what makes a short-term financing strategy risky. In the first plan, short term financing is covering more than long term. While short term rates are usually less than the rates of long term loans, the rates can fluctuate erratically. As inflation goes up or down, so do interest rates. If this happens, then unexpected rate hikes can mean less earnings or even bankruptcy. Since it is cheaper to issue long-term capital in large sums, the disadvantage is the total needs are not totally predictable and the financing tends to be out of sync with the actual needs. This cost wise may increase costs due to the need of short term loans in addition to make up for any shortfalls. Patricia(

...wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lear’s earnings before interest and taxes are $200,000. Determine Lear’s earnings after taxes under this financingplan. The tax rate is 30 percent.
- All fixed assets= $600,000
- Half of its permanent current assets = $175,000
- Long-term financing cost=...

...FIN/200
AlternativeFinancingPlans
14. Lear, Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 invested in fixed assets.
a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 10 percent. Short- term financing currently costs 5 percent. Lear’s earnings before interest and...

...Alternative Financial Plans
FIN/200
14.) Lear, Inc. has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 invested in fixed assets.
a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lear’s earnings before interest and taxes are...

...of 0 to 15 percent, and common equity in the range of 25 percent to 45 percent. Timberland currently has total assets of $1.5 billion financed as follows: $900 million debt, $75 million preferred stock, and $525 million common equity. The company plans to raise an additional $37 million at this time.
Company C. Ripe and Fresh Canning Company:
Ripe and Fresh Canning Company is a large operation located in Valdosta, Georgia, that purchases peaches and other fruits from...

...and Sinisa Bogdan. 2011. Factoring: Alternative model of financing. UTMS Journal of Economics 2 (2): 189–206.
Preliminary communication (accepted April 2, 2011)
FACTORING: ALTERNATIVE MODEL OF FINANCING
Sasa Ivanovic1 Suzana Baresa Sinisa Bogdan
Abstract: This paper aims to present factoring as an alternative funding model. This paper also tries to scientifically explore and emphasize its economic role thorough...

...Issues and Alternatives of Foamtec
The Profit loss, in term of the pharmaceutical industry, in foam production sector
According to the figure in the case study, which is provided, we can see that the annual sales for foam production, in year 2006 and 2007, will get a negative result. Our prediction, with this issue, is that the company cannot sell out much of bulk foams to other industries. Also, considering the market share of the company, in the pharmaceutical sector, the...

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