Fly UVU is a fairly new regional carrier. They have managed an EBIT of $750,000...
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Fly UVU is a fairly new regional carrier. They have managed an EBIT of $750,000 for the past two years and are looking at expanding their services. However, between the cost of new planes and operating at new airports, they would need to generate an additional $1,000,000. Use the following information to help them analyze the tax benefit of the loan.
Assume an interest rate of 8%. Also, at $500,000 EBIT, use a base bracket of $335,000, a base tax of $113,900, and a marginal rate of 34%.
How much would Fly UVU pay in taxes with the loan?
and without the loan?
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