XYZ Has Excess Cash of $600,000 and Earns 3% on Excess

question 7

Multiple Choice

XYZ has excess cash of $600,000 and earns 3% on excess cash.The firm plans to pay back $500,000 of debt this year,after paying the full annual interest on its debt.If XYZ has a corporate tax rate of 40%,what is the free cash flow to the firm?

• A)$550,000
• B)$1.55 million
• C)$1 million
• D)$1.1 million
• E)$1.05 million

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Definitions:

Legitimacy

The recognition and acceptance of an authority, institution, or government as right and proper, often derived from law, custom, or consent.

Political Organization

Refers to the way a society creates and applies structures and systems of governance, including the distribution of power and the management of public affairs.

Kinship

The system of social relationships that form an integral part of the lives of most humans in most societies, including relationships derived through descent and marriage.

State

A political institution established to manage and defend a complex, socially stratified society occupying a defined territory. It is organized and directed by a government that has the capacity to make rules, impose order, tax its subjects, and use military force to defend or expand its territories.