Use the Information for the Question(s)below

question 6

Multiple Choice

Use the information for the question(s) below.
Flagstaff Enterprises expected to have free cash flow in the coming year of $8 million,and this free cash flow is expected to grow at a rate of 3% per year thereafter.Flagstaff has an equity cost of capital of 13%,a debt cost of capital of 7%,and it has a 35% corporate tax rate.
-If Flagstaff currently maintains a debt to equity ratio of 1,then Flagstaff's after-tax WACC is closest to:

• A)10.25%.
• B)10.00%.
• C)9.50%.
• D)9.25%.

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Definitions:

Wolff-Kishner

A chemical reduction process that completely removes oxygen from a carbonyl group, converting it into a methylene group.

Hydroxylamine

A compound with the formula NH2OH, used as a reducing agent and in the synthesis of various chemicals.

Benzaldehyde

An aromatic aldehyde with the formula C6H5CHO, known for its almond-like scent and used in the synthesis of other organic compounds.

Diethyl Acetal

A volatile, colorless liquid used as a solvent and as an intermediate in organic synthesis, formed from ethanol and acetaldehyde.