Use the following information to answer the question(s) below:
-The free cash flow to equity in 2008 is closest to:
A) -5,005
B) -1,755
C) 5,575
D) 9,995
E) 14,995

Question

Use the following information to answer the question(s) below:  
-The free cash flow to equity in 2008 is closest to:
A) -5,005 
B) -1,755 
C) 5,575 
D) 9,995 
E) 14,995

Quizplus · Accepted Answer

C) After-Tax interest expense = interest expense(1 - T_c) = 6,800(1 - .35) = 4,420 Note T_c = income tax/pre-tax income = 3,748/10,708 = 35% FCF_firm = NI + after tax interest + Depreciation - ΔNWC - capital expenditures FCF_firm = 6,960 + 4,420 + 6,865 - 3,250 - 20,000 = -5,005 FCF_equity = FCF_firm + Net borrowing - after tax interest expense FCF_equity = -5,005 + 15,000 - 4,420 = 5,575

Use the Following Information to Answer the Question(s) Below