Is developing an asset financing plan

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Reference no: EM131182015

Christensen & Assoc. Is developing an asset financing plan. Christensen 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%. Christensen 's tax rate is 40%.

A) construct two financing plans----one conservative, with 80 of assets financed by long-term sources, and the other aggressive, with only 60% of asstes financed by long-term sources.

B) If Christensen 's earnings before interest and taxes are $325,000, calculate net income Under each alternative.

C) what are some of the risks associated with each plan ?

D) Which plan would you recommend to Christensen ? Why ?

Reference no: EM131182015

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