Nighthawk Steel, a manufacturer of specialized tools, has $$4,700,000$ in assets.

Short$-$term rates are $10$ percent. Long$-$term rates are $15$ percent. $($Note that long$-$term rates imply a return to any equity$).$ Earnings

before interest and taxes are $$1,000,000.$ The tax rate is $20$ 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 $6-8.$

Earnings after taxes