Rainy Day Co. has established an asset financing plan. The company has $200,000 in temporary current...
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Rainy Day Co. has established an asset financing plan. The company has $200,000 in temporary current assets, $400,000 in permanent current assets and $700,000 in fixed assets. The assets are financed by $300,000 in shareholders equity, and the remainder with external financing (long and short term). The interest rate is 7% for short-term financing and 10% for long-term financing. The company's EBIT is $300,000, and it has a tax rate of 30%. The plan will finance temporary current assets with short-term debt, with the balance financed by long- term sources. 1. Calculate the total debt financing required. (1 mark) Hint - This question continues on in the next question. Hint - Try Example 5 from the Chapter 6 Outline first - this question is very similar. Note don't use commas - for $100,000 type 100000 Answer: Rainy Day Co. has established an asset financing plan. The company has $200,000 in temporary current assets, $400,000 in permanent current assets and $700,000 in fixed assets. The assets are financed by $300,000 in shareholders equity, and the remainder with external financing (long and short term). The interest rate is 7% for short-term financing and 10% for long-term financing. The company's EBIT is $300,000, and it has a tax rate of 30%. The plan will finance temporary current assets with short-term debt, with the balance financed by long- term sources. 1. Calculate the total debt financing required. (1 mark) Hint - This question continues on in the next question. Hint - Try Example 5 from the Chapter 6 Outline first - this question is very similar. Note don't use commas - for $100,000 type 100000 Answer:
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Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
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