LBriscoe

What about ? 39? It’s not in the Errata (follow copy and paste from another thread)
“If BioTLabs establishes a dividend and issues additional debt, the most likely effect on FCFF will be:”
a) no effect
b) a decrease in FCFF
c) an increase in FCFF
I put C, but the answer was A stating that changing the capital structure by increasing debt will have no impact on FCFF but will initially increase FCFE blah blah blah.
I disagree with this. If you increase the amount of debt FCFF will increase by the amount of the tax shield generated by the interest payment by the amount of int exp x tax rate.
Am I missing something here?