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Compute what will earnings after taxes be

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Colter Steel has $5,450,000 in assets.

Temporary current assets $ 2,900,000

Permanent current assets 1,595,000

Fixed assets 955,000 Total assets $ 5,450,000

Assume the term structure of interest rates becomes inverted, with short-term rates going to 13 percent and long-term rates 5 percentage points lower than short-term rates. Earnings before interest and taxes are $1,150,000. The tax rate is 20 percent.

Problem 1: 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?

Reference no: EM132750356

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