Husband and wife team, Jay and Jennifer have a very successful landscaping business. Both are recent business school graduates, and while they tend to agree on most major business decisions, they are currently having a disagreement on how they should finance their business. Jay, the more conservative one, believes interest rates are likely going higher, and would like to finance as much assets on a longer term basis as possible. Jennifer disagrees, and believes rates will remain at current levels. Jennifer would like to take advantage of the significantly lower short term rates and fund as much as possible on a short term basis. The landscaping business has $1,100,000 in current assets, $470,000 of which are considered permanent current assets. In addition the firm has $720,000 invested in capital assets. The business has EBIT of $320,000 and a tax rate of 30%. Long term rates 10% Short term rates 5% Jennifer's proposal - Finance all capital assets and half of its permanent assets with long-term financing costing. Jay's proposal - Finance all capital assets and permanent current assets plus half of its temporary current assets with long-term financing. TASK - Calculate the company's earnings after tax for each proposal. Use the template below. Discuss the risks associated with each proposal. Jennifer Jay Short Term debt Long term debt EBIT Interest: Short term Long term TOTAL interest expense EBT Taxes Net Income Husband and wife team, Jay and Jennifer have a very successful landscaping business. Both are recent business school graduates, and while they tend to agree on most major business decisions, they are currently having a disagreement on how they should finance their business. Jay, the more conservative one, believes interest rates are likely going higher, and would like to finance as much assets on a longer term basis as possible. Jennifer disagrees, and believes rates will remain at current levels. Jennifer would like to take advantage of the significantly lower short term rates and fund as much as possible on a short term basis. The landscaping business has $1,100,000 in current assets, $470,000 of which are considered permanent current assets. In addition the firm has $720,000 invested in capital assets. The business has EBIT of $320,000 and a tax rate of 30%. Long term rates 10% Short term rates 5% Jennifer's proposal - Finance all capital assets and half of its permanent assets with long-term financing costing. Jay's proposal - Finance all capital assets and permanent current assets plus half of its temporary current assets with long-term financing. TASK - Calculate the company's earnings after tax for each proposal. Use the template below. Discuss the risks associated with each proposal. Jennifer Jay Short Term debt Long term debt EBIT Interest: Short term Long term TOTAL interest expense EBT Taxes Net Income