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problem: Norton, Inc. is developing a plan to finance its asset base. The company has $5,000,000 in current assets, of which 20 percent are permanent, and $12,000,000 in fixed assets. Long-term rates are currently 9.5 percent, while short-term rates are at 7 percent. Norton’s tax rate is 30%.

Create a conservative financing plan with 80% of assets financial by long-term sources. If Norton’s EBIT is $6,000,000, find out their net income be?

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