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?



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1.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?

Cash flow from from investing will decrease by $200 million and Cash flow from financing will increase by $180 million

Cash flow from from investing will decrease by $180 million and Cash flow from financing will increase by $200 million

Cash flow from from investing will decrease by $200 million and Cash flow from financing will increase by $220 million

Only Cash flow from from investing will decrease by $200 million


please explain me the answer

1 Answer(s)


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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.

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