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Posted on May 19, 2024

Grommit Engineering expects to have net income next year of $18.77 million and free cash flow of $9.39 million.Grommit's marginal corporate tax rate is 21%.

a. If Grommit increases leverage so that its interest expense rises by $5.1 million, how will net incomechange?

b. For the same increase in interestexpense, how will free cash flowchange?

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