Gamma Pharmaceuticals Has the Following Financial Information for the Current

question 36

Multiple Choice

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. $\begin{array} { l l r r } & { \text { Curtent } } & \\& \text { year } & \text { Projected } \\\text { NOPAT } & \text { NA } & 1,000 \\\text { Tatal aperating capital } & 2,000 & 2,200 \\\text { Tetal debt } & 900 & 800 \\\text { Interest rate an debt } & 6 \% & 6 \% \\\text { Tar rate } & 25 \% & 25 \%\end{array}$
 
 

• A) $549
• B) $604
• C) $664
• D) $730
• E) $803

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Definitions:

Defined Contribution Plan

A type of retirement plan where the amount contributed to the plan is specified, but the benefit received at retirement depends on the plan's investment performance.

Endowment Fund

A fund established by a foundation, institution, or individual, where the principal amount is kept intact while the investment income is available for use.

Variable Annuity

An insurance product that provides future payments to the holder, with the payouts varying depending on the performance of the investment options chosen.

Defined Contribution

A type of retirement plan in which the amount contributed to the plan is specified, but the future benefit amount is not guaranteed, depending on investment returns.