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A firm generated $400 million in free cash flow and spent $340 million of this paying net interest and buying down its net debt. What was the net payout to shareholders? A. $70 million B. $60 million C. $75 million D. $65 million

Question

A firm generated 400millioninfreecashflowandspent400 million in free cash flow and spent 340 million of this paying net interest and buying down its net debt. What was the net payout to shareholders? A. 70millionB.70 million B. 60 million C. 75millionD.75 million D. 65 million

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Solution

The net payout to shareholders can be calculated by subtracting the amount spent on net interest and buying down its net debt from the total free cash flow generated by the firm.

In this case, the firm generated 400millioninfreecashflowandspent400 million in free cash flow and spent 340 million on net interest and debt reduction.

So, the calculation would be:

400million(freecashflow)400 million (free cash flow) - 340 million (net interest and debt reduction) = $60 million

Therefore, the net payout to shareholders was 60million.So,thecorrectanswerisB.60 million. So, the correct answer is B. 60 million.

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