How Much Will a Firm Need in Cash Flow Before

question 91

Multiple Choice

How much will a firm need in cash flow before tax and interest to satisfy debtholders and equityholders if the tax rate is 40%,there is $10 million in common stock requiring a 12% return,and $6 million in bonds requiring an 8% return?

• A) $1,392,000
• B) $1,488,000
• C) $2,480,000
• D) $2,800,000

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Definitions:

Valence

In psychology and motivational theory, the attractiveness or desirability of a reward or outcome.

Outcome Satisfies

The result of an action or process meets the expectations or requirements set forth.

Expectancy Theory

A psychological theory that suggests an individual's motivation is influenced by the expected outcome and the value placed on that outcome.

Employee Motivation

The degree of enthusiasm, dedication, and innovation that employees of a business contribute to their roles.