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

Corporate Finance: The Core


Edition: 4th
Authors:
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pbrown223pbrown223
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A year ago
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C
Explanation:  C) After-Tax interest expense = interest expense(1 - Tc) = 6800(1 - .35) = 4420
Note Tc = income tax/pre-tax income = 3748/10,708 = 35%
FCFfirm = NI + after tax interest + Depreciation - ΔNWC - capital expenditures
FCFfirm = 6960 + 4420 + 6865 - 3250 - 20,000 = -5005
FCFequity = FCFfirm + Net borrowing - after tax interest expense
FCFequity = -5005 + 15,000 - 4420 = 5575
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