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Nighthawk Steel, a manufacturer of specialized tools, has $5,400,000 in assets. Short-term rates are 7 percent. Long-term rates are 9.5 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,110,000. 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 6-8