Which of the Following Is the Correct Algebraic Expression of a Firm's

question 14

Multiple Choice

Which of the following is the correct algebraic expression of a firm's cash flows (C_t) ,after interest payments and corporate tax payments,to its debt and equity holders? (The corporate tax rate is T_C ,the pre-tax cash flows is X_t,and interest payments of r_DD)

• A)C_t= (X_t - r_DD)(1 - T_C)+ r_DD
• B)C_t= (X_t + r_DD)(1 - T_C)+ r_DD
• C)C_t= (X_t - r_DD)(1 - T_C)- r_DD
• D)C_t= (X_t - r_DD)(1 + T_C)+ r_DD

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Definitions:

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