McKinsee, Inc. is developing a plan to finance its asset base. The firm has $5,0
ID: 2726266 • Letter: M
Question
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 interest rates are 9.50%, while short-term interest rates are 7.00%. McKinsee's earnings before interest and taxes are $6,000,000 and its tax rate is 30%. What will be the firm's net income if McKinsee decides to use the most aggressive financing plan possible?
Select one:
A. $3,069,500
B. $3,139,500
C. $3,157,000
D. $3,367,000
Explanation / Answer
Answer D $3,367,000
In most aggressive Financing Plan Possible100 % Assets Financed by Short Terms Funds @ 7%
Current Assets 5000000 Fixed Assets 12000000 Total Assets 17000000