Grommit Engineering expects to have net income next year of $24.21 million and free cash flow of

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Grommit Engineering expects to have net income next year of $24.21 million and free cash flow of $12.11 million. Grommit’s marginal corporate tax rate is 30%.

a. If Grommit increases leverage so that its interest expense rises by $9.2 million, how will net income change?

b. For the same increase in interest expense, how will free cash flow change?

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