If Pepsi build a new office for $200 million and took a loan for the same amount at 10% interest, which of the following is true?

1 Answer(s)


First cash flow from financing will increase by $200mn due to the loan (cash inflow), then in the same period cash flow from financing will decrease by $20mn due to the interest payable (cash outflow).

Hence net of $200mn inflow - $20mn outflow is $180mn.

Then since money is being spend on the building cash flow from investing will decrease by $200mn.