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ted, with ercentage points lower than short-tem rates If long-term financing is perfectly matched (hedged) with long-term asset needs, and the some is true of short-term financing, what will earnings be after taxes? For an example of perfectly.hedged plonsee Figure 6-8 Earning after taxes $ 459,000.00 0

ted, with ercentage points lower than short-tem rates If long-term financing is perfectly matched (hedged) with long-term asset needs, and the some is true of short-term financing, what will earnings be after taxes? For an example of perfectly.hedged plonsee Figure 6-8 Earning after taxes $ 459,000.00 0

Essentials Of Investments
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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Nighthawk Steel, a manufacturer of specialized tools, has $4,200,000 in assets. Temporary current assets Permanent current assets Capital assets $1,000,000 2,000,000 1,200,000 Total assets $4,200,000 Short-term rates are 4 percent. Long-term rates are 65 percent (Note that long-term rates imply a return to ony equity). Eornings before interest and taxes are $860,000. The tax rate is 25 percent Assume the term structure of interest rotes becomes inverted, with short-term rates going to 9 percent and long-term rates 4.5 percentage points lower than short-term rates If long-term financing is perfectly matched (hedged) with long-term asset needs, and the some is true of short-term financing, what will earnings be after taxes? For an example of perfectly. hedged pians see Figure 6-8 Earning after taxes $ 459,000.00O
Transcribed Image Text:Nighthawk Steel, a manufacturer of specialized tools, has $4,200,000 in assets. Temporary current assets Permanent current assets Capital assets $1,000,000 2,000,000 1,200,000 Total assets $4,200,000 Short-term rates are 4 percent. Long-term rates are 65 percent (Note that long-term rates imply a return to ony equity). Eornings before interest and taxes are $860,000. The tax rate is 25 percent Assume the term structure of interest rotes becomes inverted, with short-term rates going to 9 percent and long-term rates 4.5 percentage points lower than short-term rates If long-term financing is perfectly matched (hedged) with long-term asset needs, and the some is true of short-term financing, what will earnings be after taxes? For an example of perfectly. hedged pians see Figure 6-8 Earning after taxes $ 459,000.00O
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