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Nighthawk Steel, a manufacturer of specialized tools, has $ 5 , 4 0 0 , 0 0 0 in assets. Short - term rates are

Nighthawk Steel, a manufacturer of specialized tools, has $5,400,000 in assets.
Short-term rates are 12 percent. Long-term rates are 17 percent. (Note that long-term rates imply a return to any equity). Earnings
before interest and taxes are $1,140,000. The tax rate is 40 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
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