Nighthawk Steel, a manufacturer of specialized tools, has $4,800,000 in assets. Temporary current assets Permanent current assets Capital assets $1,100,000 1,600,000 2,100,000 Total assets $4,800,000 Short-term rates are 5 percent. Long-term rates are 7.5 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,010,000. The tax rate is 25 percent. Assume the term structure of interest rates becomes inverted, with short-term rates going to 10 percent and long-term rates 5 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 6-8. Earning after taxes