Nighthawk Steel, a manufacturer of specialized tools, has $$4,200,000$ in assets.

Temporary current assets $$1,000,000$

Permanent current assets $2,000,000$

Capital assets $1,200,000$

Total assets $$4,200,000$

Short$-$term rates are $4$ percent. Long$-$term rates are $6\mathrm{.}5$ percent. $($Note that long$$term rates imply a return to any equity$).$ Earnings before interest and taxes are $$860,000.$ The tax rate is $25$ 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 $68.$

Earnings after taxes $