Christensen & Assoc

question 5

Essay

Christensen & Assoc.is developing an asset financing plan.Christensen has $500,000 in current assets,of which 15% are permanent,and $700,000 in capital assets.The current long-term rate is 11%,and the current short-term rate is 8.5%.Christensen's tax rate is 40%.
A)Construct two financing plans-one conservative,with 80% of assets financed by long-term sources,and the other aggressive,with only 60% of assets financed by long-term sources.
B)If Christensen's earnings before interest and taxes are $325,000,calculate net income under each alternative.
C)What are some of the risks associated with each plan?
D)Which plan would you recommend to Christensen? Why?

• A)Construct two financing plans-one conservative,with 80% of assets financed by long-term sources,and the other aggressive,with only 60% of assets financed by long-term sources.
• B)If Christensen's earnings before interest and taxes are $325,000,calculate net income under each alternative.
• C)What are some of the risks associated with each plan?
• D)Which plan would you recommend to Christensen? Why?

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Definitions:

Chlorinated Hydrocarbons

A group of chemical compounds that contain chlorine, carbon, and hydrogen, used in industrial applications but known for their environmental persistence and potential toxicity.

Aldrin

A highly toxic substance once used as an insecticide and rodenticide, now banned or restricted in many countries due to its environmental impact.

Dieldrin

A highly toxic, chlorinated, organic compound once widely used as an insecticide and pesticide before being banned due to environmental and health concerns.

First-generation

Refers to the first set of individuals or products in a new lineage or series, particularly in the context of immigrants or technology.