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Hicks Health Clubs, Inc., expects to generate an annual EBIT of $509,000 and needs to obtain financing for $1,050,000 of assets. Its tax bracket is
Hicks Health Clubs, Inc., expects to generate an annual EBIT of $509,000 and needs to obtain financing for $1,050,000 of assets. Its tax bracket is 40%. If the firm uses short-term debt, its rate will be 6.5%, and if it uses long-term debt, its rate will be 7.5%. By ho much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan? (Amounts in parentheses indicate negative value.) Multiple Choice O $9,300 O $6,300 $6,300 O ($6,300) C ta 2001
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