Hello please help me option for b part are also given b. For the same increase in interest expense, how will free cash flow change? (Select the best choicebelow.)A. Free cash flow increases by the amount of the interest expense.B. Free cash flow decreases by the amount of the interest expense.C. Free cash flow is not affected by interest expense.D. None of the above. Grommit Engineering expects to have net income next year of $29.78 million and free cash flow of $22.28 million.Grommit's marginal corporate tax rate is 25%.a. If Grommit increases leverage so that its interest expense rises by $5.2 million, how will net income change?b. For the same increase in interest expense, how will free cash flow change?BECERa. If Grommit increases leverage so that its interest expense rises by $5.2 million, how will net income change?Net income will fall to $ million. (Round to two decimal places.)

Next year net income = $29.78 million Free cash flow = $22.28 million Tax rate = 25% Increase in…

b. For the same increase in interest expense, how will free cash flow change? (Select the best choice below.) A. Free cash flow increases by the amount of the interest expense. B. Free cash flow decreases by the amount of the interest expense. C. Free cash flow is not affected by interest expense. D. None of the above.

b. For the same increase in interest expense, how will free cash flow change? (Select the best choice below.) A. Free cash flow increases by the amount of the interest expense. B. Free cash flow decreases by the amount of the interest expense. C. Free cash flow is not affected by interest expense. D. None of the above.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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