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

question 63

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 continuously to maintain a constant debt-equity ratio of 50%,then the value of this new project is closest to:

• A)$184 million.
• B)$188.5 million.
• C)$320 million.
• D)$340 million.

---

Definitions:

Significant Difference

A statistical assessment that shows that the observed results in a study were unlikely to have occurred by chance.

Standard Error

The standard deviation of the sampling distribution of a statistic, typically used to measure the accuracy of sample mean estimates.

Population Standard Deviation

A statistic that measures the dispersion or spread of a set of data points in a population.

Sample Size

The number of observations or data points collected in a statistical study.