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Use the Information for the Question(s) Below

Question 2

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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