Sentry recently reported $12,300 of sales, $6,300 of operating costs (other than depreciation) and $1,330 of depreciation. The company had $3,500 of bonds that carry a 5.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets totaling $1,700 while net operating working capital remained constant.

A. What was Sentry's EBIT?

B. What was Sentry's Free Cash flow?

In 2007 George Romero reported $8,000,000 of sales, $3,000,000 of operating costs other than depreciation, and $1,330,000 of depreciation. He had no amortization charges, it had $5,000,000 of bonds outstanding that carry a 5% interest rate, and its federal-plus-state income tax rate was 25%. 2008 data is expected to remain unchanged except for one item, depreciation, which is expected to increase by $107,000. By how much will the net income change as a result of the change in depreciation?

To calculate the interest expense using information provided regarding the bonds. Assume the same amount of interest will be paid during both years on the outstanding bonds.