P/CF

We are only looking at cash flow, not free cash flow. At least according to the question

thats correct ist just cash flow and not FCFE/FCFF/CFI/CFF

i shall soon post the answer

Okay. So they will actual list the CF proxy they want in the denominator?

no, its more related to Financial Leverage concept

If we are using straight up CF then I would go with A also with Lance’s reasoning.

At least either FCF or CF

The ans. has got to be C right… P/CF where CF means NI + Dep + Amort. If we increase leverage (assuming positive return) we will increase NI (the ROE model will also tell us this) which should decrease our P/CF measure

uh-oh. That makes sense. Increase in NI should outweigh increase in interest expense.

All else equal, what causes more leverage to increase NI?? It increases variability in NI…

There seems to be too many variables that can change. Screw finance.

Yes it does. But if you have a postive return then it amplifies it.

mwvt9 Wrote: ------------------------------------------------------- > ****Man I am going to fail this exam****** > > Edit for being an idiot. If you are going to fail then 95% of the people are going to fail.

Maybe it is D then.

It just amplifies ratios, not the actual number.

i am wondering about the whole interest expense coming in and Dividends changing in future, as already posted by another… but that maybe too detailed… and is there any guarantee that R goes up with more debt? usually after-tax cost of debt is less than cost of equity

Post the ans. so we can see how bad we suck…

cfaboston28 Wrote: ------------------------------------------------------- > mwvt9 Wrote: > -------------------------------------------------- > ----- > > ****Man I am going to fail this exam****** > > > > Edit for being an idiot. > > > If you are going to fail then 95% of the people > are going to fail. Thanks for the kind comment, but I think everybody is overestimating my abilites. Although I haven’t found any one topic beyond comprehension. I can’t seem to keep things straight after not looking at them for awhile. I only answer the questions that I have just reviewed. How are you feeling boston?

The direction in the amplification depends on other things doesn’t in? Such as positive or negative NI.

Niblita75 Wrote: ------------------------------------------------------- > The direction in the amplification depends on > other things doesn’t in? Such as positive or > negative NI. Yes.