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Hicks health clubs inc expects to generate an annual ebit

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Hicks Health Clubs, Inc., expects to generate an annual EBIT of $500,000 and needs to obtain financing for $1,000,000 of assets. Their tax bracket is 40%. If the firm goes with a short-term financing plan, their rate will be 8 percent, and with a long-term financing plan their rate will be 9 percent. What much more or less will their initial annual earnings after taxes be if they choose the most aggressive financing plan?

Reference no: EM13623524

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