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Lear Inc. has $990,000 in current assets. $445,000 of which are considered permanent current assets. In addition, the firm ha

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Answer #1
Total current assets 990000
(-) Permanent current assets 445000
Temporary current assets 545000
Fixed assets 790000
a.
Interest = ( 790000 + 0.5 * 445000 ) * 8% + ( 0.50 * 445000 + 545000 ) * 6% 127050
Earnings before interest and taxes 390000
(-) Interest 127050
Earnings before taxes 262950
(-) Taxes @ 40% 105180
Earnings after taxes 157770
b.
Interest = ( 790000 + 445000 + 0.50 * 545000 ) * 8% + ( 0.50 * 545000 ) * 6% 136950
Earnings before interest and taxes 390000
(-) Interest 136950
Earnings before taxes 253050
(-) Taxes @ 40% 101220
Earnings after taxes 151830
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