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?
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?
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 5P
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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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