Colter Steel has $5,150,000 in assets. Temporary current assets Permanent current assets Fixed assets Total assets $ 2,300,000 1,565,000 1,285,000 $ 5,150,000 Assume the term structure of interest rates becomes inverted, with short-term rates going to 13 percent and long-term rates 4 percentage points lower than short-term rates. Earnings before interest and taxes are $1,090,000. The tax rate is 20 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? Answer is complete but not entirely correct. Earnings after taxes $ 541,600 S Guardian Inc. is trying to develop an asset-financing plan. The firm has $330,000 in temporary current assets and $230,000 in permanent current assets. Guardian also has $430,000 in fixed assets. Assume a tax rate of 40 percent. a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 80 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest rate is 12 percent on long-term funds and 7 percent on short-term financing. Compute the annual interest payments under each plan. Conservative Aggressive Annual Interest b. Given that Guardian's earnings before interest and taxes are $210,000, calculate earnings after taxes for each of your alternatives. Conservative Aggressive Earning After Taxes Carmen's Beauty Salon has estimated monthly financing requirements for the next six months as follows: January February March $9,600 3,600 May 4,600 June April $ 9,600 10,600 5,600 Short-term financing will be utilized for the next six months. Projected annual interest rates are: January 5.0% April 12.0% February 6.0% May 12.0% March 9.0% June 12.0% Bound your monthly interest rate to 2 decimal places when expr b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six months? (Round your monthly interest rate to 2 decimal places when expressed as a percent. Round your interest payments to the nearest whole cent.) Total dollar interest payments b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller than with the short-term financing plan? O Smaller Larger Next Bombs Away Video Games Corporation has forecasted the following monthly sales: January February $119,000 July $ 64,000 112,000 August 64,000 March 44,000 September 74,000 April 44,000 October 104,000 May 39,000 November 124,000 June 54,000 December 142,000 Total annual sales = $984,000 es Bombs Away Video Games sells the popular Strafe and Capture video game. It sells for $5 per unit and costs $2 per unit to produce. A level production policy is followed. Each month's production is equal to annual sales (in units) divided by 12. Of each month's sales, 40 percent are for cash and 60 percent are on account. All accounts receivable are collected in the month after the sale is made. d. Prepare a monthly cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is $5,000, which is also the minimum desired. (Negative amounts should be indicated by a minus sign.) Beginning cash January Bombs Away Video Games Corporation Cash Budget February March April May June Net cash flow Cumulative cash balance Monthly loan or (repayment) $ 0 $ 0 $ 0 $ 34,600 54,800 51,800 aces Ending cash balance $ 15,800 $ 35,200 $ 23,200 $ Cumulative loan balance $ 0 $ 0 $ 0 $ 5,000 $ 34,600 $ 5,000 $ 5,000 89,400 $ 141,200 July Bombs Away Video Games Corporation Cash Budget August Beginning cash Net cash flow Cumulative cash balance Monthly loan or (repayment) 38,800 32,800 5.000 5.000 I September October November December 5000 (34,400) 50001 28,800 5.000 10,800 (15,200) 5000 $