Homework Answers
answer: ($6848)
if we choose aggressive
EBIT=503000
interest expense =1070000*8%=85600
earnings before tax=503000-85600=417400
tax expense=417400*36%=150264
earnings after tax=417400-150624=267136
if we choose conservative
EBIT=503000
interest expense=1070000*7%=74900
earnings before tax=503000-74900=428100
tax expense=428100*36%=154116
earnings after tax=428100-154116=273984
if we choose the more aggressive method instead of conservative method the earnings after tax will be decreased by $6848 (273984-267136).
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