1. Consider the following data with regards to free cash flow (FCF):

• Revenue = $100,000
• Cash operating expenses = $93,500
• Depreciation expense = $1,000
• Effective tax rate = 25%
• Incremental investment in operating net working capital = $50
• Incremental investment in long-term operating assets = $4,000

If cash operating expenses were to decrease by 10% but everything else remains as shown above, how much would free cash flow change? Assume no other factors change.

2. Consider the following data with regards to free cash flow (FCF):

• Revenue = $100,000
• Cash operating expenses = $93,500
• Depreciation expense = $1,000
• Effective tax rate = 25%
• Incremental investment in operating net working capital = $50
• Incremental investment in long-term operating assets = $4,000

If cash operating expenses were to increase by 10% but everything else remains as shown above, how much would free cash flow change? Assume no other factors change.