McKinsee Inc

McKinsee Inc.is developing a plan to finance its asset base.The firm has $5,000,000 in current assets,of which 20% are permanent,and $12,000,000 in capital assets.Long-term rates are currently 9.5%,while short-term rates are at 7%.McKinsee's tax rate is 30%.
A)Construct a conservative financing plan with 80% of assets financed by long-term sources.If McKinsee's earnings before interest and taxes are $6,000,000,what will their net income be?
B)An alternative and more aggressive plan would be to finance 60% of total assets with long-term financing.Assuming that EBIT was again $6,000,000,what will net income be under this alternative?
C)If interest rates were expected to increase,which plan would you recommend? Why?