The balance sheet for Agro Inc. shows current assets of $650,000 and capital assets of $1,200,000.Of the current assets, $300,000 can be considered permanent with the remainder being temporary.Agro is considering two different financing strategies for its assets:

1.All of the capital assets and half of the permanent current assets will be financed through long term debt at a rate of 8%.The remaining current assets will be financed with short term debt at a rate of 6%.

2.All of the capital assets and all of the permanent current assets will be financed through long term debt at a rate of 8%.The temporary current assets will be financed with short term debt at a rate of 6%.

Assuming that Agro will have earnings before interest and taxes of $400,000 and that Agro is subject to an effective tax rate of 40%, determine the earnings after taxes for each of the strategies.Which of the two would be considered the more aggressive strategy? (provide a reason)