Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2013-2018
Pro Forma Assets & Liabilities for Ideko, 2013-2018

-What is the free cash flow to equity holders for a firm with free cash flow of $7 000, after-tax interest expense of $1 000, and an increase in debt of $3 000?
A)$7 000
B)$8 000
C)$6 000
D)$9 000

Question

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2013-2018
  Pro Forma Assets & Liabilities for Ideko, 2013-2018
 
-What is the free cash flow to equity holders for a firm with free cash flow of $7 000, after-tax interest expense of $1 000, and an increase in debt of $3 000?
A)$7 000 
B)$8 000 
C)$6 000 
D)$9 000

Quizplus · Accepted Answer

Free cash flow to equity (FCFE) is calculated as free cash flow to the firm plus net borrowing minus interest expense (after tax). In this case, FCFE = $7,000 (free cash flow) + $3,000 (increase in debt) - $1,000 (after-tax interest expense) = $9,000.

Use the Tables for the Question(s)below