Explain if interest rates were expected to increase

Assignment Help Business Management

Reference no: EM13111085

McKinsee Inc. is developing a plan to finance its asset base. The firm has $5,000,000 in current assets of which 20% are permanent and $12,000,000 in fixed assets. Long-term rates are currently 9.5%, while short-term rates are at 7%. McKinsee's tax rate is 30%.
a) Make a conservative financing plan with 80% of assets financed by long-term sources. If McKinsee's earnings earlier interest and taxes are $6,000,000, explain what will their net income be?
b) An alternative as well as more aggressive plan would be to finance 60% of total assets with long-term financing. Presuming that EBIT was again $6,000,000 what will net income be under this alternative?
c) Explain if interest rates were expected to increase which plan would you recommend? Why?

Reference no: EM13111085

Questions Cloud

Determine the new pressure of the gas : Determine the new pressure of the gas and express your answer in Pa

Explain how much cash will be freed up : The industry is now adopting a new inventory system if the new system is able to reduce the organization's inventory level and increase the organization's inventory turnover ratio to 5 while maintaining the same level of sales, explain how much ca..

Compute number of models of each truck must be bought : If company wants to satisfy gasoline demand with minimum monthly operating expense, how many models of each truck must be bought?

How are these values compatible : the oxaloacetate-malate couple is less negative than the NAD_- NADH couple. How are these values compatible with the transfer of electrons from malate to NAD_ in the TCA cycle?

Explain if interest rates were expected to increase : McKinsee Inc. is developing a plan to finance its asset base. The firm has $5,000,000 in current assets of which 20% are permanent and $12,000,000 in fixed assets. Long-term rates are currently 9.5%, while short-term rates are at 7%. McKinsee's ta..

Payment for subscriptions is billed one month in advance : All monthly payments are due by the 15th of each month. Payments received after the 20th of the month will result in a late fee of $20.00. The late fee may be waived one time per year.

Test value-criminal proceedings : Some defendants in criminal proceedings plead guilty and are sentenced without a trial, whereas others who plead innocent are subsequently found guilty and then are sentenced.

Develop three assays for a set of newly described mutations : The only instruments available to you are only a PCR instrument, gel electrophoresis equipment, and DNA sequencing instrument.

Explain how many times a year will trojan sandwiches order : Explain how many times a year will Trojan sandwiches order bread under the ordering policy in part (b)? Explain how many days will there be between order placements?

User Account

All Pages