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Andrej [43]
3 years ago
12

Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to obtain financing for $1,200,000 of assets.

Its tax bracket is 40%. If the firm uses short-term debt, its rate will be 7.5%, and if it uses long-term debt, its rate will be 9%. By how much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan
Business
1 answer:
Zepler [3.9K]3 years ago
8 0

Answer:

Hicks Health Clubs, Inc. earnings after taxes will change by minus $10,800 if they choose the more aggressive financing plan instead of the more conservative plan.

Explanation:

Note: I experienced a difficulty submitting the explanation here. Kindly find attached the full answer and explanation in the attached Microsoft word document.

Download docx
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