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8 October, 23:47

When a firm changes its capital structure by issuing or retiring debt, for example, this change alters the firms unlevered free cash flow. True / False.

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  1. 9 October, 00:28
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    True

    Explanation:

    Unlevered free cash flows represent the amount of cash a business has before meeting it's financial obligations such as operating expenses or periodic interest payments on borrowed funds.

    When a firm issues further debt, it's available funds increase. Similarly, if a firm retires or repays it's debt, it's available funds decrease.

    Therefore, change in capital structure by issue or retirement of debt alters a firm's unlevered free cash flows.
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