Question $1$

Last year, Cayman Corporation had sales of $$7$ million, total variable costs of $$2$ million, and

total fixed costs of $$1$ million. In addition, they paid $$480,000$ in interest to bondholders.

Cayman has a $21\%$ marginal tax rate. If Cayman's sales increase $6\%,$ what should be the

increase in operating income? SET YOUR CALCULATOR TO $4$ DECIMAL PLACES. ROUND

TO $2$ DECIMAL PLACES AT THE END. DO NOT ENTER THE $\%$ SIGN. FOR EXAMPLE, IF

YOUR ANSWER IS $9\mathrm{.}4567,$ ENTER IT AS $9\mathrm{.}46.$