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In 2017, Lysander Shipping had cash flow from assets of $1.65 million, paid $450,000 in interest...

In 2017, Lysander Shipping had cash flow from assets of $1.65 million, paid $450,000 in interest expense and $375,000 in dividends. The company also repurchased outstanding stock for $1.45 million. The company:

A.

issued debt of $625,000.

B.

paid down debt of $200,000.

C.

paid down debt of $825,000.

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Answer #1

Given for Lysander Shipping

Cash flow from assets CFA = $1.65 million

Interest paid I = $450000

Dividend paid D = $375000

Stock repurchased = $1.45 million

So, cash flow to stockholders CFS = Dividend + stock repurchase = 375000 + 1450000 = $1825000

=> Cash flow to creditors CFC = CFA - CFS = 1650000 - 1825000 = -$175000

CFC = I - change in debt

=> Change in debt = I - CFC = 450000 + 175000 = $625000

So company raised debt of $625000 during the year.

Option A is correct.

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