Guardian, Inc., is trying to develop an asset-financing plan. The firm has $395,000 in temporary current assets and $299,500 in permanent current assets. Guardian also has $496,500 in fixed assets. Assume a tax rate of 37 percent.
Requirement 1:
Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 70 percent of assets financed by long-term sources, and the other should be aggressive, with only 59 percent of assets financed by long-term sources. The current interest rate is 7 percent on long-term funds and 5 percent on short-term financing.