Question 1 – 16 points Kelly & Assoc. is developing an asset financing plan. Kelly has $500,000 in current assets, of wh

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Question 1 16 Points Kelly Assoc Is Developing An Asset Financing Plan Kelly Has 500 000 In Current Assets Of Wh 1 (229.07 KiB) Viewed 42 times

Question 1 – 16 points Kelly & Assoc. is developing an asset financing plan. Kelly 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%. Kelly's tax rate is 40%. a) Construct three financing plans, the first: perfectly hedged, the second: conservative, with 80% of assets financed by long-term sources, and the third: aggressive, with only 60% of assets financed by long-term sources. b) If Kelly's earnings before interest and taxes are $325,000, calculate net income under each alternative. c) Which plan would you recommend to Kelly? Why?