Question

Colter Steel has $4,200,000 in assets.
Temporary current assets ...... $1,000,000
Permanent current assets ...... 2,000,000
Fixed assets ........... 1,200,000
Total assets ............ $4,200,000
Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 percent.
If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? For a graphical example of perfectly matched plans.



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  • CreatedOctober 14, 2014
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