Northern Express paid $85 in dividends and $110 in interest expense during a given year. During...
Northern Express paid $85 in dividends and $110 in interest expense during a given year. During that same year, the firm issued $40 in new equity shares, issued new debt of $65, and repaid $23 of old debt. What is the cash flow to creditors for that year?
Homework Answers
Cash flow to creditors is calculated as follows:
Cash flow to creditors for a period = Interest expense - Ending long term debt + Beginning long term debt
Thus, according to the information provided, Interest expense = $110
Beginning long term debt = x ( as beginning long term debt is not given )
Ending long term debt = x + 65 - 23
Therefore,
Cash flow to creditors = 110 - (x +65- 23) + x
= 110 - x - 65 + 23 + x
= $ 68
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