Use the Following Information to Answer the Question(s)below

question 88

Multiple Choice

Use the following information to answer the question(s) below.
Wyatt Oil is considering an investment in a new project with an unlevered cost of capital of 11%.Wyatt's corporate tax rate is 21% and its debt cost of capital is 6%.The project has free cash flows of $25 million per year which are expected to decline by 3% per year.
-If Wyatt adjusts its debt once per year to maintain a constant debt-equity ratio of 50%,then the value of this new project is closest to:

• A)$188 million.
• B)$184.4 million.
• C)$320 million.
• D)$340 million.

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Definitions:

Value of Y

Typically refers to the numerical worth or significance assigned to the variable 'Y' in mathematical or statistical contexts.

Slope

The measure of the steepness or incline of a line, often representing the rate of change of a function.

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared over a period of time.

Total Output

The total quantity of goods or services produced by a firm or economy in a given period.