Gamma Pharmaceuticals has the following financial information for the current year and projected for next year. Calculate Gamma's projected free cash flow to equity. $\begin{array} { l l r r }
& { \text { Curtent } } & \
& \text { year } & \text { Projected } \
\text { NOPAT } & \text { NA } & 1,000 \
\text { Tatal aperating capital } & 2,000 & 2,200 \
\text { Tetal debt } & 900 & 800 \
\text { Interest rate an debt } & 6 \% & 6 \% \
\text { Tar rate } & 25 \% & 25 \%
\end{array}$

Question

Gamma Pharmaceuticals has the following financial information for the current year and projected for next year. Calculate Gamma's projected free cash flow to equity. $\begin{array} { l l r r } 
&  { \text { Curtent } } & \
& \text { year } & \text { Projected } \
\text { NOPAT } & \text { NA } & 1,000 \
\text { Tatal aperating capital }  & 2,000 & 2,200 \
\text { Tetal debt }  & 900 & 800 \
\text { Interest rate an debt }  & 6 \% & 6 \% \
\text { Tar rate }  & 25 \% & 25 \%
\end{array}$

Quizplus · Accepted Answer

$\begin{array}{llr}
NOPAT&1000\
\text { Less investment in TOC }& 200 \text { Change in TOC }\
\text { FCF }&800\
\text { Less After-tax interest }\
\text { expense } & 36  =\text { Debt } x \text { interest rate } \mathrm{x}(1-\mathrm{T}) \
\text { Plus Increase in debt } & -100  \text { Change in debt } \
\mathrm{FCFE} & 664=\mathrm{FCF}-\text { after-tax interest expense }+\text { increase in debt }
\end{array}$

Gamma Pharmaceuticals Has the Following Financial Information for the Current