Sherlock Homes, a manufacturer of low cost mobile housing, has $4,900,000 in assets.

Temporary current assets	$1,800,000
Permanent current assets	1,540,000
Capital assets	1,560,000
Total assets	$4,900,000

Short-term rates are 8 percent. Long-term rates are 13 percent. (Note that longterm rates imply a return to any equity). Earnings before interest and taxes are $1,040,000. The tax rate is 30 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 $