Answer:
Explanation:
Long term Financing = Permanent Current Assets + Fixed Assets
Long term Financing = $1,590,000 + $1,010,000 = $2,600,000
Short Term Financing = Temporary Current Assets = $2,800,000
Long Term Interest Expense = $2,600,000 * 0.17 = $442,000
Short Term Interest Expense = $2,800,000 * 0.12 = $336,000
Total Interest Expense = $442,000 + $336,000 = $778,000
Earnings before Taxes = Earnings before Interest & Taxes - Interest Expense
Earnings before Taxes = $1,140,000 - $778,000 = $362,000
Earnings after Taxes = Earnings before Taxes * (1 – Tax rate)
Earnings after Taxes = $362,000 * (1 – 0.40) = $217,200
