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Zorn Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm's annual sales are expected to total $3,570,000, its

Zorn Corporation is deciding whether to pursue a restricted or relaxed working capital investment policy. The firm's annual sales are expected to total $3,570,000, its fixed assets turnover ratio equals 5.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 8%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.1. If the firm adopts a restricted policy, how much lower would its interest expense be than under the relaxed policy? Do not round intermediate calculations. a. $10,880 b. $5,440 c. $13,056 d. $21,760 e. $6,528

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