Temporary Current Assets

$$2,500,000$

Permanent Current Assets

$$3,000,000$

Capital Assets

$$7,000,000$

Total

$$12,500,000$

The company is trying to develop an asset financing plan. Ideally, they would like to incorporate a "perfectly hedged" financing plan, where long$-$term assets are financed by long$-$term debt and short$-$term assets are financed by short$-$term debt.

Alternatively, an aggressive plan suggested by their C$.$F$.$O is to finance $40\%$ of the total assets with short$-$term debt and the remaining $60\%$ of the total assets with long$-$term debt.

EBIT next year is expected to be $$2,000,000,$ and the company's tax rate is $30\%.$

Cursed Systems Inc. has $500,000$ common shares outstanding. Assume the cost of short term debt is $5\%$ and the cost of long term debt is $8\%.$

Under a perfectly hedged plan:

$$L$/$T interest expense is

$$S$/$T interest expense is

$$EPS is

Under an aggressive plan.

$$L$/$T interest expense is

$$S$/$T interest expense is

$$EPS is

$$What is the shape of the yield curve? Is it inverted, flat or normal?