Financing plan instead of the more conservative

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Reference no: EM131599864

Hicks Health Clubs, Inc., expects to generate an annual EBIT of $515,000 and needs to obtain financing for $1,120,000 of assets. Their tax bracket is 38%. 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 8.5 percent. By how much will their earnings after tax change if they choose the more aggressive financing plan instead of the more conservative? (Amounts in parentheses indicate negative value.

Reference no: EM131599864

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