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Question 1 1 pts Seattle Health Plans currently uses zero-debt financing. Its operating profit is $7 million, and it pays taxes at a 22 percent
Question 1 1 pts Seattle Health Plans currently uses zero-debt financing. Its operating profit is $7 million, and it pays taxes at a 22 percent rate. It has $8 million in assets and, because it is all-equity financed, $8 million in equity. Suppose the firm is considering replacing 32 percent of its equity financing with debt financing that bears an interest rate of 7 percent. What impact would the new capital structure have on the firm's profit? (Enter your answer in millions of dollars, rounded to 2 decimal places. If profit would increase, enter your answer as a positive number. If profit would decrease, enter your answer as a negative number. Do not include $ sign or commas. For example a decrease in profit of $1.234 million dollars would be entered as -1.23.)
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