Explore BrainMass

Explore BrainMass

    Matching asset mix and financing plan

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Remington Steele has $4,200,000 in assets. Temporary current assets equal $1,000,000. Permanent current assets equal $2,000,000. Fixed assets equal $1,200,000. Total assets equal $4,200,000.

    Short-term rates are 8%. Long-term rates are 13%. Earnings before interest and taxes are $996,000. The tax rate is 40%. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?

    Show and explain all work.

    © BrainMass Inc. brainmass.com June 4, 2020, 12:45 am ad1c9bdddf
    https://brainmass.com/business/accounting/matching-asset-mix-financing-plan-358034

    Solution Preview

    Long term assets = permanent current assets + fixed assets = 2,000,000+1,200,000=3,200,000
    Short term assets = ...

    Solution Summary

    The solution explains how to calculate the earnings after tax under matching asset mix and financing plan

    $2.19

    ADVERTISEMENT