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Lear Inc. has $950,000 in current assets, $450,000 of which are considered permanent current assets. In addition, the firm has $1,000,000 invested in capital assets.

Lear Inc. has $950,000 in current assets, $450,000 of which are considered permanent current assets. In addition, the firm has $1,000,000 invested in capital assets.

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 costing 9 percent. Short-term financing currently costs 5 percent.

Assuming it has EBIT of 460,000 and a tax rate of 25%, what will its EAT be after paying for its total interest costs?

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