Question
Colter Steel has $4,900,000 in assets. Temporary current assets $ 1,800,000 Permanent current assets 1,540,000 Fixed assets 1,560,000 Total assets $ 4,900,000 Assume the term
Colter Steel has $4,900,000 in assets.
Temporary current assets $ 1,800,000
Permanent current assets 1,540,000
Fixed assets 1,560,000
Total assets $ 4,900,000
Assume the term structure of interest rates becomes inverted, with short-term rates going to 14 percent and long-term rates 4 percentage points lower than short-term rates. Earnings before interest and taxes are $1,040,000. 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?
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