Nighthawk Steel, a manufacturer of specialized tools, has $5,350,000 in assets. Temporary current assets Permanent current assets Capital assets Total assets $2,700,000 1,585,000 1,065,000 $5,350,000 Short-term rates are 11 percent. Long-term rates are 16 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,130,000. 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
Nighthawk Steel, a manufacturer of specialized tools, has $5,350,000 in assets. Temporary current assets Permanent current assets Capital assets Total assets $2,700,000 1,585,000 1,065,000 $5,350,000 Short-term rates are 11 percent. Long-term rates are 16 percent. (Note that long-term rates imply a return to any equity). Earnings before interest and taxes are $1,130,000. 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vikram bhai
Transcribed Image Text:Nighthawk Steel, a manufacturer of specialized tools, has $5,350,000 in assets.
Temporary current assets
Permanent current assets
Capital assets
Total assets
$2,700,000
1,585,000
1,065,000
$5,350,000
Short-term rates are 11 percent. Long-term rates are 16 percent. (Note that long-term rates imply a return to any equity). Earnings before
interest and taxes are $1,130,000. 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
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