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Krypton Engineering expects to have net profit next year of $ 16.01 million and free cash...

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Finance

Krypton Engineering expects to have net profit next year of $16.01 million and free cash flow of $ 22.36 million. ? Krypton'smarginal corporate tax rate is 40 %. a. If Krypton increasesleverage so that its interest expense rises by $ 4.8 ?million, howwill its net profit? change? b. For the same increase in interest?expense, how will free cash flow? change?

Answer & Explanation Solved by verified expert
3.7 Ratings (385 Votes)
a New net profit if interest expense rises by 48 million New net profit Old net profit before tax Interest 1 Tax rate Here Tax rate 40 or 040 Interest 48 millon Old net profit before    See Answer
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Krypton Engineering expects to have net profit next year of $16.01 million and free cash flow of $ 22.36 million. ? Krypton'smarginal corporate tax rate is 40 %. a. If Krypton increasesleverage so that its interest expense rises by $ 4.8 ?million, howwill its net profit? change? b. For the same increase in interest?expense, how will free cash flow? change?

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