The free cash flow to equity in 2008 is closest to:
A)-5005
B)-1755
C)5575
D)9995

Question

Quizplus · Accepted Answer

C)After-Tax interest expense = interest expense(1 - T_c)= 6800(1 - .35)= 4420 Note T_c = income tax/pre-tax income = 3748/10,708 = 35% FCF_firm = NI + after tax interest + Depreciation - ΔNWC - capital expenditures FCF_firm = 6960 + 4420 + 6865 - 3250 - 20,000 = -5005 FCF_equity = FCF_firm + Net borrowing - after tax interest expense FCF_equity = -5005 + 15,000 - 4420 = 5575

The Free Cash Flow to Equity in 2008 Is Closest