tax rate is 40%.How much would BG Company's earnings after taxes be under this financing plan? O P112,500 O P85,000 O P127,500 O P225,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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BG Company has P8,000,000 in
current assets, P3,500,000 of which
are considered permanent current
assets. In addition, the firm has
P6,000,000 invested in fixed assets.
BG Company wishes to finance all
fixed assets and permanent current
assets plus half of its temporary
current assets with long-term
financing costing 15%. Short-term
financing currently costs 10%. BG
Company's earnings before interest
and taxes are P2,200,000. Income
tax rate is 40%.How much would BG
Company's earnings after taxes be
under this financing plan?
P112,500
O P85,000
P127,500
O P225,000
Transcribed Image Text:BG Company has P8,000,000 in current assets, P3,500,000 of which are considered permanent current assets. In addition, the firm has P6,000,000 invested in fixed assets. BG Company wishes to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing costing 15%. Short-term financing currently costs 10%. BG Company's earnings before interest and taxes are P2,200,000. Income tax rate is 40%.How much would BG Company's earnings after taxes be under this financing plan? P112,500 O P85,000 P127,500 O P225,000
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