Lear Inc. Current Assets $700,000 Permanent Current Assets $300,000 Fixed Assets

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Lear Inc. Current Assets $700,000 Permanent Current Assets $300,000 Fixed Assets $400,000 Tax Rate 34% Long-Term Financing 10% Short-Term Financing 5% a. Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing. Lear's earnings before interest and taxes are $200,000. Determine Lear's earnings after taxes under this financing plan. b. The alternative, Lear might wish to finance all fixed 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 earning after taxes? c. What are some of the risks and cost considerations with each financing plan?

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