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I provided answer for number 1 please answer 2/3
1. Matching asset mix and financing plans. Colter Steel has $4,200,000 in assets. Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? Please use the most appropriate way of financing. 2. Expectations hypothesis and interest rates: Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Do an analysis similar to that in the righthand portion of Table 6-6. 3. 4. 1-year T-bill at beginning of year 1.5% 5. 1-year T-bill at beginning of year 2.8% 6. 1-year T-bill at beginning of year 3..... 7% 7. 1-year T-bill at beginning of year 4.10% Long term financing equivalents Fixed assets =1,200,000 Permanent current assets =2,000,000 Total long term financing equivalents =3,200,000 Short term financing equivalents Temporary current assets =$1,000,000 Long term interest rate =13% Short term interest rate =8% Long term interest expense =3,200,00013%= $416,000 Short term interest expense =1,000,0008%= $80,000 Total interest expenses =$496,000 Earnings before interest and tax=S996,000 Interest expense =$496,000 Earnings before tax =$500,000 Taxes ( Tax rate =40%)=$200,000 Earnings after tax=$300,000 1. Matching asset mix and financing plans. Colter Steel has $4,200,000 in assets. Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? Please use the most appropriate way of financing. 2. Expectations hypothesis and interest rates: Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Do an analysis similar to that in the righthand portion of Table 6-6. 3 4. 1-year T-bill at beginning of year 1..... 5% 5. 1-year T-bill at beginning of year 2..8% 6. 1-year T-bill at beginning of year 3..... 7% 7. 1-year T-bill at beginning of year 4.10% 8. 1. Matching asset mix and financing plans. Colter Steel has $4,200,000 in assets. Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? Please use the most appropriate way of financing. 2. Expectations hypothesis and interest rates: Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Do an analysis similar to that in the righthand portion of Table 6-6. 3. 4. 1-year T-bill at beginning of year 1.5% 5. 1-year T-bill at beginning of year 2.8% 6. 1-year T-bill at beginning of year 3..... 7% 7. 1-year T-bill at beginning of year 4.10% Long term financing equivalents Fixed assets =1,200,000 Permanent current assets =2,000,000 Total long term financing equivalents =3,200,000 Short term financing equivalents Temporary current assets =$1,000,000 Long term interest rate =13% Short term interest rate =8% Long term interest expense =3,200,00013%= $416,000 Short term interest expense =1,000,0008%= $80,000 Total interest expenses =$496,000 Earnings before interest and tax=S996,000 Interest expense =$496,000 Earnings before tax =$500,000 Taxes ( Tax rate =40%)=$200,000 Earnings after tax=$300,000 1. Matching asset mix and financing plans. Colter Steel has $4,200,000 in assets. Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? Please use the most appropriate way of financing. 2. Expectations hypothesis and interest rates: Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Do an analysis similar to that in the righthand portion of Table 6-6. 3 4. 1-year T-bill at beginning of year 1..... 5% 5. 1-year T-bill at beginning of year 2..8% 6. 1-year T-bill at beginning of year 3..... 7% 7. 1-year T-bill at beginning of year 4.10% 8
