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By how much will their earnings after taxes change

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Question - Hicks Health Clubs, Inc., expects to generate an annual EBIT of $508,000 and needs to obtain financing for $1,000,000 of assets. Its tax bracket is 38%. If the firm uses short-term debt, its rate will be 7.5%, and if it uses long-term debt, its rate will be 8.5%. By how much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan?

Reference no: EM132976651

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