River Cruises is allequityfinanced with 100,000 shares. It now proposes to issue $250,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 25,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar increase in the combined after-tax income of its debt holders and equity holders if profits before interest are:
a. $75,000
b. $100,000
c. $175,000