Last year Thomas Lee Partners reported $10,500 of sales, $6,250 of operating costs other than depreciation, and $1,300 of depreciation. The company had no amortization charges, it had $5,000 of bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 35%.
This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $1,150. By how much will net after-tax income change as a result of the change in depreciation?
The company uses the same depreciation calculations for tax and stockholder reporting purposes.