Nighthawk Steel, a manufacturer of specialized tools, has $5,040,000 in assets.Temporary current assetsPermanent current assetsCapital assetsTotal assets$1,180,0001,680,0002,180,000$5,040,000Short-term rates are 5 percent. Long-term rates are 7.5 percent. (Note that long-term rates imply a return to any equity). Earningsbefore interest and taxes are $1,050,000. 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 willearnings be after taxes? For an example of perfectly hedged plans. see Figure 6-8Earning after taxes

Given InformationTotal Assets = $5,040,000Temporary Current Assets = $1,180,000Permanent Current…

Answered: Nighthawk Steel, a manufacturer of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Excel Online Structured Activity: Income and Cash Flow Analysis The Berndt Corporation expects to have sales of $11 million. Costs other than depreciation are expected to be 80% of sales, and depreciation expected to be $1.1 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ b. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest…
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Colter Steel has $4,550,000 in assets. Temporary current assets $ 1,100,000 Permanent current assets 1,505,000 Fixed assets 1,945,000 Total assets $ 4,550,000 Assume the term structure of interest rates becomes inverted, with short-term rates going to 13 percent and long-term rates 2 percentage points lower than short-term rates. Earnings before interest and taxes are $970,000. The tax rate is 20 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?

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