Nighthawk Steel, a manufacturer of specialized tools, has $4,850,000 in assets. Temporary current assets $1,700,000 1,535,000...

 

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Nighthawk Steel, a manufacturer of specialized tools, has $4,850,000 in assets. Temporary current assets $1,700,000 1,535,000 1,615,000 Permanent current assets Capital assets Total assets $4,850,000 Short-term rates are 7 percent. Long-term rates are 12 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,030,000. The tax rate is 20 percent. If long-term financing is perfectly matched (hedged) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? For an example of perfectly hedged plans, see Figure 6-8. Earnings after taxes %24 Nighthawk Steel, a manufacturer of specialized tools, has $4,850,000 in assets. Temporary current assets $1,700,000 1,535,000 1,615,000 Permanent current assets Capital assets Total assets $4,850,000 Short-term rates are 7 percent. Long-term rates are 12 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,030,000. The tax rate is 20 percent. If long-term financing is perfectly matched (hedged) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? For an example of perfectly hedged plans, see Figure 6-8. Earnings after taxes %24

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Long term asset need Financing Permanent current a... View the full answer