Lear Inc. has $980,000 in current assets, $440,000 of which are considered permanent current assets. In addition, the firm has $780,000 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 $380,000. 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 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 $380,000. What will be Lears earnings after taxes? The tax rate is 30 percent.

Earnings after taxes _________________$