CBEIR Question 1 30 points Multiple choice choose the correc

CBEIR Question 1 (30 points): Multiple choice: choose the correct answer. 1. A firm generated $200 million in free cash flow and paid a net dividend of $50 million to A) 50S B) 1005 C) 150s D) 350 ders. How much was paid to debtholders and debt issuers? 2. A firm paid a dividend to shareholders of s162 million and repurchased stock for ion. There were no share issues. The firm received net cash of $86 $53 mill million from debt financing transactions. What was its free cash flow? A) 130 B) 160S C) 190s D) 220s 3. A firm holding $300 million in interest-bearing financial assets and with financing debt of $900 million, reported shareholders\' equity of S What were its net financial obligations and net operating assets re A) 600S and 1100S B) 1200S and 800$ C) 800S and 1400S D) 400S and 600S 500 million spectively? 4. P/E ratios indicate growth in earnings. If future earnings are expected to be higher than current earnings (that is, growth in earnings is expected), then: E) the P/E will be high F) the P/E will be low G) the P/E will be 1 H) the P/E will be 0 5. A firm\'s return on common equity (ROCE) will equal to its return on net operating assets (RNOA) when: A) return on net operating assets bigger than net borrowing cost. B) return on net operating assets smaller than net borrowing cost. C) financial assets equal financial obligations. D) Total assets equal total obligations.

Solution

Solution:

Question 1

The correct option is C) $150

Free Cash Flow --- Free Cash Flow represents the cash generated by the company after spending the money required to maintain and keep its asset base.

Free Cash Flow is the amount available for distribution to all the securities holders of a corporate entity.

Free Cash Flow = Net Cash Flow paid to Debtholders (or Issuers) and Shareholders.

The Net Dividend $50 million paid by the company represents the cash paid to shareholders and the remaining free cash flow $150 (200 – 50) represents the amount paid to debtholders and debt issuers.

Hence, the correct option is C) $150

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