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Last year, Candy Inc. reported $12,500 of sales, $5,000 of operating costs other than depreciation,...

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Finance

Last year, Candy Inc. reported $12,500 of sales, $5,000 of operating costs other than depreciation, and $1,000 of depreciation. The company had $3,500 total debt that carry a 6.50% interest rate, and its corporate income tax rate was 35.00%. During last year, the firm had expenditures on fixed assets and net operating working capital that totaled $2,000. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $500. By how much will the depreciation change cause its free cash flow (FCF) to change?

Select one: a. $175 O b. $235 C. $150 O d. $192

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