6 points 13. Last year, Saran Company has $13,400,000 of sales, $7,300,000 of operating costs (excluding depreciation), and $1,000,000 of depreciation. The company has $6,500,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate is 35%. During last year, the firm has expenditures on fixed assets and net operating working capital that total $2,000,000. These expenditures are necessary for it to sustain operations and generate future sales and cash flows. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $750,000. The company uses the same depreciation calculations for tax and stockholder reporting purposes. What is the effect of the change in depreciation on the net income and the free cash flow? The net income will decrease by $487,500, and the free cash flow will increase by $226,500 The net income will decrease by $750,000, and the free cash flow will decrease by $262,500 The net income will decrease by $1,625,750, and the free cash flow will increase to O $2,577,500 The net income will decrease by $2,531,750, and the free cash flow will decrease to $2,577,500 None of the above 14. The sales of Fiery Corporation for last year are $300,000, and its year- 6 points end total assets are $450,000. The industry average of total assets turnover ratio (TATO) is 2.5. The new CFO believes that the corporation has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales. By how much should the assets be reduced to bring the TATO to the industry average, holding sales constant? O $120,000 O $180,000 $330,000 $750,000 None of the above ast year operating costs Voix RARHIVAemcLiF-ZUMCV2g2w/formResponserpli=1 15. Pilon Company has sales of $800,000 during last year, operating costs 7 points of $570,000, and year-end assets (which are equal to its total invested capital) of $435,000. The debt-to-total-capital ratio is 17%, the interest rate on the debt is 7.5%, and the firm's tax rate is 40%. The new CFO wants to see how the return on common equity (ROE) may be affected if the firm has used a 50% debt-to-total-capital ratio. Assume that sales, operating costs, total assets, total invested capital, and the tax rate will not be affected, but the interest rate will rise to 8%. By how much will the ROE change in response to the change in the capital structure? Do not round your intermediate calculations. O 21.35% 37.30% 45,33% 58.65% None of the above