FIN 200 Week 6 CheckPoint Credit Policy Decisions

FIN 200 Week 6 CheckPoint Credit Policy Decisions -...

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Current Assets - Permanent Current Assets = Temporary Current Assets 800000-350000=450000 Short-term interest expense 5%[450000+.5(350000)] 5%[450000+175000] 5%*625000 31250 Long-term interest expense 10%[600000+.5(350000)] 10%[600000+175000] 10%*775000 77500 Total interest rate 31250+77500 108750 Earnings Before200000 Less: Short term31250 Less: Long term77500 Less: Taxes 27375 Earnings After T63875 Marc Saintelus: Great job! 15/15 Marc Saintelus: Great job! Points earned 47/50 A
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Short-term interest expenses 5%[.5(450000)] 5%[225000] 11250 Long-term interest expenses 10%[600000+350000+.5(450000)] 10%[600000+350000+225000) 10%*1175000 117500 Total Interest expense
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Unformatted text preview: 11250+117500 128750 Earnings be 200000 Less: Short 11250 Less: Long 117500 Less: Taxe 21375 Earnings af 49875 Marc Saintelus: Great job! 15/15 Option B is more expensive with fewer earnings after taxes but is less risky Marc Saintelus: Good job! The alternative financing has less risk despite its higher cost, thus should not be rejected; the alternative y. However, the long-term capital may be more than necessary and can be used for investment. The rates are not high like the short-term rates for plan B. Plan n B is overall a better option compared to the risks of option A....
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This note was uploaded on 01/04/2011 for the course FIN 200 taught by Professor Williams during the Spring '08 term at University of Phoenix.

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FIN 200 Week 6 CheckPoint Credit Policy Decisions -...

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