Hicks Health Clubs, Inc. expects to generate annual earnings before interest and taxes (EBIT) of...
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Hicks Health Clubs, Inc. expects to generate annual earnings before interest and taxes (EBIT) of $650,000 and needs to obtain financing for $670,000 of assets. The tax bracket is 40%. If the firm goes with a short term financing plan, their rate will be 7.5%, and with a long term financing plan, the rate will be 9%. By how much will their earnings after taxes change if they choose the more aggresive financing plan instead of the more conservative plan?
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