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What will earnings after taxes be

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Currently, Atlas Tours has $5.64 million in assets. This is a peak six-month period. During the other six months, temporary current assets drop to $430,000.

Temporary current assets$1,230,000
Permanent current assets1,860,000
Capital assets2,550,000
Total assets$5,640,000

Short-term rates are 4 percent. Long-term rates are 5 percent. Annual earnings before interest and taxes are $1,110,000. The tax rate is 38 percent.

Problem a. If the assets are perfectly hedged throughout the year, what will earnings after taxes be? (Enter answers in whole dollar, not in million.)

Problem b. If short-term interest rates increase to 5 percent when assets are at their lowest level, what will earnings after taxes be?

Reference no: EM132708643

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