Hi,

I know this question was previously posted and answered here before but I still cannot seem to understand the logic. I am having trouble in particular with the effect of Interest expense and A/P on FCF. Can someone please explain to me step by step on how to arrive at the answers? Thank you. “Indicate the effect on this period’s FCFF and FCFE of a change in each of the items listed here. Assume a $100 increase in each case and a 40 % tax rate” D) Interest Expense I) Notes Payable Answers: D) FCFF 0 FCFE -60 I) FCFF 0 FCFE +100