Lear, Inc. has $1,500,000 in current assets, $630,000 of which are considered permanent current assets. In addition, the firm has $880,000 invested in capital assets. a. Lear wishes to finance all capital assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lears earnings before interest and taxes are $480,000. Determine Lears earnings after taxes under this financing plan. The tax rate is 30 percent.

Earnings after taxes $

b. As an alternative, Lear might wish to finance all capital assets 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 $480,000. What will be Lears earnings after taxes? The tax rate is 30 percent.

Earnings after taxes $