Developing plan to finance its asset base

Assignment Help Financial Management

Reference no: EM131059141

McKinsee Inc. is developing a plan to finance its asset base. The firm has $3,000,000 in current assets, of which 20% is permanent, and $10,000,000 is in fixed assets. Long-term rates are currently 8%, while short-term rates are at 6%. McKinsee's tax rate is 30%.

a) Construct a conservative financing plan with 80% of the assets financed by long-term sources. If McKinsee's earnings before interest and taxes are $4,500,000, what will its net income be?

b) An alternative and more aggressive plan would be to finance 60% of total assets with long-term financing. Assuming that EBIT was again $4,500,000, what will net income be under this alternative

Reference no: EM131059141

Questions Cloud

Question regarding the constant downward velocity : a) What is the net force acting on an object with a mass of 10 kilograms, falling at a constant downward velocity of 15 meters per second (15 m/s)?Please show work.

Continental carriers cash study : Has anybody worked on the "Continental Carriers, Inc." case study? If so, what's the best response to the following question? How should the acquisition of Midland Freight be financed, taking into account to cost of comparisons and other appropriate ..

Use the appropriate time value of money table : On December 28 each year, you are planning to make a charitable donation of $2880 and are in the 25 percent tax bracket. You are planning to deposit the tax savings in a savings account for the next 13 years at 4 percent, what will be the future valu..

What is the value or of teh bonds : A corporation issuse 12% annual bonds the pay $1000 at maturity. These bonds mature in 15 years.What is the value (PV) or (Vb) of teh bonds if the current or maket or prevailing or going or YTM is 10%,12% and 14%.Please show what is the N,the PMT,the..

Developing plan to finance its asset base : McKinsee Inc. is developing a plan to finance its asset base. The firm has $3,000,000 in current assets, of which 20% is permanent, and $10,000,000 is in fixed assets. Long-term rates are currently 8%, while short-term rates are at 6%. McKinsee's tax..

Establish retirement plan : John would like to establish a retirement plan that returns an amount of $100,000 after a period of 20 years from now. Build a spreadsheet model to calculate the amount John must contribute at the end of each year towards his retirement fund, assumin..

Determine the project NPV : HFX Ltd. has the opportunity to undertake the following project: The project requires an immediate $1,000,000 investment in equipment that will be added to an ongoing asset pool with a 20% CCA rate. Determine the project's NPV. Should HFX accept or r..

Project capital investment cash flows from investment : A company faces the following investment alternatives: Project Capital Investment Cash Flows from Investment I $7 million $1.2 million per year in perpetuity II $12 million $1.5 million per year in perpetuity. use the profitability index to determine..

Firm has faces the investment alternatives : Your firm has faces the following investment alternatives, and can only select one project. Calculate the payback period for each project. If your company wants the shortest payback period possible, which project should you choose?

User Account

All Pages