Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Could you explain the answer more detailed. Why it leads to higher cash flow from operation and less cash flow from financing? A zero coupon

image text in transcribedCould you explain the answer more detailed. Why it leads to higher cash flow from operation and less cash flow from financing?

A zero coupon bond, compared to a bond issued at par, will result in higher: A) interest expense. B) cash flows from operations (CFO). C) cash flows from financing (CFF). The correct answer is B) cash flows from operations (CFO). The zero-coupon bond will have higher cash flows from operations, as the cash interest expense in this case is zero and no cash is paid until maturity. Candidates should remember that any bond issued at a discount will have more cash flow from operations and less cash flow from financing

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions