Question
When projecting CORP's cash flows, you found that projected UFCFs are negative for several years going forward despite strongly positive NOPAT projections. Assuming your projections
When projecting CORP's cash flows, you found that projected UFCFs are negative for several years going forward despite strongly positive NOPAT projections. Assuming your projections are correct, which of the following statements is TRUE?
A) CORP is passing through financial distress, but is likely to be able to recover after this turbulent period given the positive future NOPAT projections
B) CORP will be bankrupted within a few years
C) CORP has negative UFCF projections despite positive NOPAT projections because most cash flows are going to equity holders, not debt holders
D) CORP is expected to heavily invest in working capital and/or physical capital (i.e, PP&E) going forward
E) CORP probably has high interest expenses, which would explain why UFCF projections are negative despite positive NOPAT projections
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