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Last year, Ste rart Stern Inc. reported $11,250 of sales, $4,500 of operating costs cther than depreciation, and $1,250 cf deprecation. The company had S3,
Last year, Ste rart Stern Inc. reported $11,250 of sales, $4,500 of operating costs cther than depreciation, and $1,250 cf deprecation. The company had S3, 500 of bonds outstanding that carra 6.5% interest rate, and its federal plus state incom tax rate was 35%. During last year, the firm had e enditures on fixed assets and net operating orking capital that totaled $2 000 Tese expenditures were necessary for it to sustain operations and generate rutu sales and cash flows. This year's data are expected to remain unchanged except for one item, dapreciation, which is expected to increase by $550. By how much will the depreciation change cause (1) the firm's net income and (2) its free cash flow to change? Note that the company uses the same depreciation for tax and stockholder reporting purposes. Do not round the intermeciate calculations Net Income $384.65 $202.13 O b. -$286.00 $211.75 -$125.43 $236.78 $357,50 $192.50 314.60 $184.80
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