A firm needs $$1\mathrm{.}3$ million in additional funds. These can be borrowed from a commercial bank with a loan at $6$ percent for one year or from an insurance company at $9$ percent for five years. The tax rate is $30$ percent.

What will be the firm's earnings under each alternative if earnings before interest and taxes $($EBIT$)$ are $$445,000?$ Round your answers to the nearest dollar.

Commercial bank: $

Insurance company: $

If EBIT will remain $$445,000$ next year, what will be the firm's earnings under each alternative if short$-$term interest rates are $5$ percent? Round your answers to the nearest dollar.

Commercial bank: $

Insurance company: $

If EBIT will remain $$445,000$ next year, what will be the firm's earnings under each alternative if short$-$term interest rates are $13$ percent? Round your answers to the nearest dollar.

Commercial bank: $

Insurance company: $

Why do earnings tend to fluctuate more with the use of short$-$term debt than with long$-$term debt?

The earnings fluctuate more with the bank loan because the terms of the loan

$-$Select$-$

every year.

If long$-$term debt had a variable interest rate that fluctuated with changes in interest rates, would the use of short$-$term debt still be riskier than long$-$term debt?