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Free Cash Flow to Equity This year a firm has FCFF of $11.75 million. The firm...

Free Cash Flow to Equity This year a firm has FCFF of $11.75 million. The firm has interest expense of $3 million and is in a 34% tax bracket and debt increased by $4 million. The firm's free cash flow to equity is ____________ million.

Multiple Choice

  • $4.75

  • $13.77

  • $9.77

  • $11.75

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Answer #1

The firm's free cash flow to equity is computed as shown below:

= FCFF - Interest Expense (1 - tax rate) + Increase in Debt

= $ 11.75 million - $3 million (1 - 0.34) + $ 4 million

= $ 13.77 million

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