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Nighthawk Steel, a manufacturer of specialized tools, has $ 4 , 6 8 0 , 0 0 0 in assets. Temporary current assets $ 1
Nighthawk Steel, a manufacturer of specialized tools, has $ in assets.
Temporary current assets $
Permanent current assets
Capital assets
Total assets $
Shortterm rates are percent. Longterm rates are percent. Note that longterm rates imply a return to any equity Earnings before interest and taxes are $ The tax rate is percent. Assume the term structure of interest rates becomes inverted, with shortterm rates going to percent and longterm rates percentage points lower than shortterm rates.
If longterm financing is perfectly matched hedged with longterm asset needs, and the same is true of shortterm financing, what will earnings be after taxes? For an example of perfectly hedged plans, see Figure
Earning after taxes............?
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