Use the Information for the Question(s) Below

question 56

Multiple Choice

Use the information for the question(s) below.
Fly by Night Aviation (FBNA) expects to have net income next year of $24 million and free cash flow of $27 million. FBNA's marginal corporate tax rate is 40%.
-IF FBNA increases leverage so that its interest expense rises by $1 million,then the amount its free cash flow will change is closest to:

• A) -$600,000
• B) -$400,000
• C) $600,000
• D) $400,000

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Definitions:

Cousins Subs Systems, Inc.

A submarine sandwich chain founded in Milwaukee, Wisconsin, known for its handcrafted, deli-fresh subs.

Oral Statements

Spoken words that can convey promises, intentions, or information, which may or may not be legally binding depending on the context.

Joint Stock Company

A business entity where ownership is shared through the issuance of shares, allowing for the capital to be collectively raised by shareholders.

Corporation

A legal entity that is separate and distinct from its owners, which can own property, incur debt, sue and be sued.