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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 $4,680,000 in assets.
Temporary current assets $1,060,000
Permanent current assets 1,560,000
Capital assets 2,060,000
Total assets $4,680,000
Short-term rates are 7 percent. Long-term rates are 9.5 percent. (Note that longterm rates imply a return to any equity). Earnings before interest and taxes are $990,000. The tax rate is 25 percent. Assume the term structure of interest rates becomes inverted, with short-term rates going to 12 percent and long-term rates 6 percentage points lower than short-term rates.
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 be after taxes? For an example of perfectly hedged plans, see Figure 68.
Earning after taxes............?

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