$1)$ Wukong Inc. recently reported operating income $($EBIT$)$ of $$3\mathrm{.}75$ million, depreciation of

$$1\mathrm{.}40$ million, and had a tax rate of $30\%.$ The firm's expenditures on fixed assets and net operating

working capital totaled $$0\mathrm{.}8$ million. How much was its free cash flow, in millions?

$2)$ Frank Inc has the following balance sheet and income statement data:

The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current

ratio to equal the industry average, $3\mathrm{.}00,$ without affecting either sales or net income. Assuming that

inventories are sold off and not replaced to get the current ratio to the target level, and that the funds

generated are used to buy back common stock at book value, by how much would the ROE change? Do

not round your intermediate calculations.