Nighthawk Steel, a manufacturer of specialized tools, has $5,460,000 in assets. Temporary current assets $1,320,000...
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Nighthawk Steel, a manufacturer of specialized tools, has $5,460,000 in assets. Temporary current assets $1,320,000 Permanent current assets 1,820,000 Capital assets 2,320,000 Total assets $5,460,000
Short-term rates are 4 percent. Long-term rates are 6.5 percent. (Note that longterm rates imply a return to any equity). Earnings before interest and taxes are $1,120,000. The tax rate is 25 percent. Assume the term structure of interest rates becomes inverted, with short-term rates going to 9 percent and long-term rates 4.5 percentage points lower than short-term rates.
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