Use the Information for the Question(s)below

question 96

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 the value of Flagstaff as a levered firm is closest to:

• A)$114 million.
• B)$100 million.
• C)$111 million.
• D)$128 million.

---

Definitions:

Growth Spurt

A rapid increase in growth, especially height and weight, often occurring during puberty.

Intellectual Growth

The development of mental faculties and acquisition of knowledge and understanding.

Critical Period

A specific time during development when the presence or absence of certain experiences has a profound effect on the development of the individual.

Imprinting

A form of rapid learning occurring at a particular life stage that establishes a long-lasting behavioral response to a specific individual or object.