In the current year, a company paid interest of $50,000, had net capital expenditures of $300,000,...
In the current year, a company paid interest of $50,000, had net capital expenditures of $300,000, and issued net new debt of $90,000. In addition, the company reported cash flow from operating activities of $500,000, cash flow from investing activities of ($350,000), and cash flow from financing activities of $165,000. The marginal tax rate is 30%. Compute the free cash flow to the equity holders.
a)$235,000
b) $250,000
c) $290,000
d) $835,000
Homework Answers
Calculate the cash flow from equity as follows:
Cash flow to equity = Operating flow - capital expenditure + newdebt
Cash flow to equity = $500,000-$300,000+ $90,000
Cash flow to equity =$290,000
Answer: Option C.
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Received $200,000 when the company had a seasoned equity
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