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

question 74

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 appropriate WACC for this new project is closest to:

• A)7.5%.
• B)8.67%.
• C)10.27%.
• D)10.8%.

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Definitions:

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in GDP, real income, employment, industrial production, and wholesale-retail sales.

Consumer Ethnocentrism

The belief held by customers that purchasing domestic goods is morally right and superior to buying foreign products.

Hindu Goddess

A female deity in Hinduism, representing various aspects of life, nature, and the cosmos, such as prosperity, knowledge, and power.

WTO

The World Trade Organization, an international body that deals with the rules of trade between nations, aiming to ensure smooth, predictable, and free trade.