Question: What is deferred tax liability and why use this method? Explain briefly. KL, Inc. expects to create an EBIT of $ 1,000,000 annually and is

What is deferred tax liability and why use this method? Explain briefly.

KL, Inc. expects to create an EBIT of $ 1,000,000 annually and is required to provide financing for assets of $ 2,000,000. The company's tax bracket is 25%. The interest rate will be 7% if the firm uses short-term debt and 10% if it uses long-term debt. How much will the net profit change if the company chooses to use short-term debt financing for the first year?

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