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Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to...

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Accounting

Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to obtain financing for $1,200,000 of assets. The companys tax bracket is 40%. If the firm uses short-term debt, its rate will be 7.5%, and if it uses long-term debt, its rate will be 9%. By how much will earnings after taxes change if the company chooses to use short-term debt financing for the first year?
$18,000
$10,800

$6,000

$10,000

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