Question
In: Finance
7) Assume the following: Cash Flow From Assets = $30; Interest Expense = $7; Dividends =...
7) Assume the following: Cash Flow From Assets = $30; Interest Expense = $7; Dividends = $5 and the firm paid off $12 in long-term debt. According to the Cash Flow Identity _____ its common stock in the amount of ___? A) repurchased; 6$ B) Issued 6$ C) issued $54 D) repurchased; $24
Solutions
Expert Solution
cash flow to creditors = Interest expense - [ending long term debt -beginning long term debt]
= 7 - [-12]
= 7+12
= 19
cash flow from asset =cash flow to creditors+ cash flow to stockholders
30 = 19 + cash flow to stockholders
30- 19 = cash flow to stockholders
cash flow to stockholders = 11
where ,
cash flow to stockholders = dividend -[Ending equity -beginning equity]
11 = 5 - [Ending equity -beginning equity]
[Ending equity -beginning equity] = 5-11
= - 6
correct option is " A) repurchased; 6$
since there is an cash outflow of $ 6 (negative),it means company has repurchased its shares.
jeff jeffy answered 1 year agoRelated Solutions
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