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What will earnings after taxes

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Question - Currently, Atlas Tours has $5.96 million in assets. This is a peak six-month period. During the other six months, temporary current assets drop to $470,000.

Temporary current assets $1,270,000

Permanent current assets 1,940,000

Capital assets 2,750,000

Total assets $5,960,000

Short-term rates are 3 percent. Long-term rates are 6 percent. Annual earnings before interest and taxes are $1,150,000. The tax rate is 38 percent.

a. If the assets are perfectly hedged throughout the year, what will earnings after taxes be?

b. If short-term interest rates increase to 6 percent when assets are at their lowest level, what will earnings after taxes be?

Reference no: EM132503884

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