How Does a Firm's Enterprise Value Change If the Firm

question 19

Multiple Choice

How does a firm's enterprise value change if the firm issues equity and uses the proceeds to repay debt?

• A) No change
• B) Decreases
• C) Increases
• D) Indeterminate
• E) None of the above.

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Definitions:

Financing Activities

Transactions that involve raising capital, repaying investors, issuing stocks, or paying dividends as part of managing the company’s finances.

Net Cash

The amount of cash available after all cash inflows and outflows have been accounted for, typically within a specific period.

Operating Activities

Activities that relate to the primary operations of a company, such as selling products or providing services, as opposed to financing or investing activities.

Investing Activities

Financial transactions involving the purchase or sale of long-term assets and investments.