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Hicks Health Clubs, Incorporated expects to generate an annual EBIT of $504,000 and needs to obtain financing for $1,030,000 of assets. Its tax bracket is
Hicks Health Clubs, Incorporated expects to generate an annual EBIT of $504,000 and needs to obtain financing for $1,030,000 of assets. Its tax bracket is 39%. If the firm uses short-term debt, its rate will be 8.0%, and if it uses long-term debt, its rate will be 9.0%. By how much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan? Note: Amounts in parentheses indicate negative value. Multiple Choice ($6,283) ($10,283) $10,283 $6,283
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