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Please help me with these questions, I am stuck and I cannot figure them out for some odd reason! Burnt Bacon Barbeque is developing an
Please help me with these questions, I am stuck and I cannot figure them out for some odd reason!
Burnt Bacon Barbeque is developing an asset financing plan. BBB has $500,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 11%, and the current shortterm rate is 8.5%. BBB's tax rate is 40%. Construct two financing plans--one conservative, with 80% of assets financed by long-term sources, and the other aggressive, with only 60% of assets financed by long-term sources. What are some of the risks associated with plan A? High Mountain Adventure is developing an asset financing plan. High Mountain has $500,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 11%, and the current short-term rate is 8.5%. High Mountain's tax rate is 40%. Construct two financing plans--one conservative, with 80% of assets financed by long-term sources, and the other aggressive, with only 60% of assets financed by long-term sources. What are some of the risks associated with plan B? Hello Kitty Kat House is developing an asset financing plan. Kitty has $500,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 11%, and the current shortterm rate is 8.5%. Kitty's tax rate is 40%. Construct two financing plans--one conservative, with 80% of assets financed by long-term sources, and the other aggressive, with only 60% of assets financed by long-term sources. If Kitty's earnings before interest and taxes are $325,000, calculate net income under each alternative. A. A) Plan A $123,000 Plan B $119,000 B. B) Plan A $132,000 Plan B $123,500 C. C) Plan A $19,000 Plan B $26,000 D. D) Plan A $119,000 Plan B $123,000 Technical Data Inc, TDI., has $10,000,000 in assets. If it goes with a low liquidity plan for the assets, it can earn a return of 15 percent, but with a high liquidity plan, the return will be 10 percent. If the firm goes with a shortterm financing plan, the financing costs on the $10,000,000 will be 8 percent, and with a long-term financing plan, the financing costs on the $10,000,000 will be 9 percent. Compute the anticipated return after financing costs on the most aggressive asset-financing mix. A. A) $100,000 B. B) $400,000 C. C) $700,000 D. D) $800,000 Under good conditions (25% probability), Financing Plan A will produce $30,000 higher return than Plan B. Under normal conditions (65% probability), Plan A will produce $10,000 higher return than Plan B, and under tight money conditions (10% probability), Plan A will produce $100,000 less than Plan B. How much more (less) is the expected value of return for Plan A over Plan B? A. A) ($10,000) B. B) ($20,000) C. C) ($60,000) D. D) $4,000Step by Step Solution
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