Use the Information for the Question(s)below

question 82

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's interest tax shield is closest to:

• A)$10 million.
• B)$18 million.
• C)$11 million.
• D)$13 million.

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Definitions:

Proposition

A declaration that conveys an assessment or viewpoint, which may be accurate or inaccurate.

Predicate

A term used in logic to refer to the part of a sentence that tells something about the subject or presents an action, often represented after the subject.

Proposition

A declaration that communicates an opinion or judgment.

Bounty Hunter

A person who pursues criminals or fugitives for a monetary reward.