What must be the net new borrowing

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Q1. A company has free cash flow of $700 and cash flow to shareholders of $200. Interest expense for the year was $400.

a. What must be the "net new borrowing", as reflected by the change in long-term debt?

b. Explain what this means.

Q2. A project will generate after-tax incremental free cash flows of $4,000 per year for the next 10 years. It costs $20,000 to pursue. The required return on the project is 15%.

a. What is the NPV?

b. What is the profitability index?

c. What is the payback period?

Reference no: EM132986135

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