Colter Steel has $4,200,000 in assets. Temporary current assets......................... $1,000,000 Permanent current assets......................... 2,000,000 Fixed assets.............................................. 1,200,000 Total assets........................................ $4,200,000 Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 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? Please use the most appropriate way of financing.
Colter Steel has $4,200,000 in assets.
Temporary current assets......................... $1,000,000
Permanent current assets......................... 2,000,000
Fixed assets.............................................. 1,200,000
Total assets........................................ $4,200,000
Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $996,000. The tax rate is 40 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? Please use the most appropriate way of financing.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
