Colter Steel has $$5,250,000$ in assets.

Short$-$term rates are $9$ percent. Long$-$term rates are $14$ percent. Earnings before interest and taxes are $$1,110,000.$ 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, see Figure $6-5.$

Impact of term structure of interest rates on financing plans $($LO$6-4)$

In Problem $12,$ assume the term structure of interest rates becomes inverted, with short$-$term rates going to $11$ percent and long$-$term rates $5$ percentage

points lower than short$-$term rates. If all other factors in the problem remain unchanged, what will earnings after taxes be$?$