Computation of net income.
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 fixed assets. Long-term rates are currently 9.5%, while short-term rates are at 7%. McKinsee's tax rate is 30%.
Construct a conservative financing plan with 80% of assets financial by long-term sources. If McKinsee's earnings before interest and taxes are $6,000,000, what will their net income be?