Colter Steel has $4,200,000 in assets. The temporary current assets are in place for nine months...

 

Transcribed Image Text:

Colter Steel has $4,200,000 in assets. The temporary current assets are in place for nine months and reduce to zero for three months. Temporary current assets Permanent current assets Capital assets $ 1,000,000 2,000,000 1,200,000 Total assets $ 4,200,000 Short-term rates are 8 percent. Long-term rates are 13 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $996.000, The tax rate is 30 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 an example of perfectly hedged.plans see Figure 6-8 Earning after taxes Colter Steel has $4,200,000 in assets. The temporary current assets are in place for nine months and reduce to zero for three months. Temporary current assets Permanent current assets Capital assets $ 1,000,000 2,000,000 1,200,000 Total assets $ 4,200,000 Short-term rates are 8 percent. Long-term rates are 13 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $996.000, The tax rate is 30 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 an example of perfectly hedged.plans see Figure 6-8 Earning after taxes

Answer rating: 100% (QA)

solution EBIT Less Interest expense EBT Less tax at 30 Earning ... View the full answer