1)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. The balance will be financed with short-term financing, which currently costs 5 percent. Lears earnings before interest and taxes are $200,000. Determine Lears earnings after taxes under this financing plan. The tax rate is 30 percent. (a) Earnings after taxes $ (b) As an alternative, Lear might wish to finance all of its fixed assets and permanent current assets plus half of its temporary current assets with long-term financing and the balance with short-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $200,000. What will be Lears earnings after taxes? The tax rate is 30 percent. (b) Earnings after taxes $ 2)Sharpe Knife Company expects sales next year to be $1,500,000 if the economy is strong, $800,000 if the economy is steady, and $500,000 if the economy is weak. Mr. Sharpe believes there is a 20 percent probability the economy will be strong, a 50 percent probability of a steady economy, and a 30 percent probability of a weak economy. What is the expected level of sales for the next year? Expected level of sales $ 3)The Harding Company manufactures skates. The company's income statement for 2010 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 2010 Sales (10,000 skates @ $50 each) $ 500,000 Less: Variable costs (10,000 skates at $20) 200,000 Fixed costs 150,000 Earnings before interest and taxes (EBIT) 150,000 Interest expense 60,000 Earnings before taxes (EBT) 90,000 Income tax expense (40%) 36,000 Earnings after taxes (EAT) $ 54,000 (a) Compute the degree of operating leverage. (Enter only numeric value.) Degree of operating leverage (b) Compute the degree of financial leverage. (Enter only numeric valuerounded to 2 decimal places.) Degree of financial leverage (c) Compute the degree of combined leverage. (Enter only numeric valuerounded to 2 decimal places.) Degree of combined leverage