Colter Steel has $5,300,000 in assets. Temporary current assets $ 2,600,000 Permanent current assets 1,580,000 Fixed assets 1,120,000 Total assets $ 5,300,000 Assume short-term interest rates are 11 percent and long-term rates are 2 percentage points lower than short-term rates. Earnings before interest and taxes are $1,120,000. 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? Earnings after taxes

Colter Steel has $5,300,000 in assets. Temporary current assets $ 2,600,000 Permanent current assets 1,580,000 Fixed assets 1,120,000 Total assets $ 5,300,000 Assume short-term interest rates are 11 percent and long-term rates are 2 percentage points lower than short-term rates. Earnings before interest and taxes are $1,120,000. 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? Earnings after taxes

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 5P

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Temporary current assets	$ 2,600,000
Permanent current assets	1,580,000
Fixed assets	1,120,000
Total assets	$ 5,300,000

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