Conservative financing plan instead of more aggressive plan

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Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to obtain financing for $1,200,000 of assets. Their tax bracket is 40%. If the firm goes with a short-term financing plan, their rate will be 7.5 percent, and with a long-term financing plan their rate will be 9 percent. By how much will their earnings after tax change if they choose the more conservative financing plan instead of the more aggressive plan? Select one: a. $10,000 b. ($10,800) c. ($6,000) d. $6,000

Reference no: EM13877642

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