Use the Information for the Question(s)below

question 25

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 .5 debt to equity ratio,then Flagstaff's after-tax WACC is closest to:

• A)10.00%.
• B)10.51%.
• C)9.50%.
• D)8.75%.

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