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

question 40

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 appropriate WACC for this new project is closest to:

• A)7.5%.
• B)8.6%.
• C)10.3%.
• D)10.8%.

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Definitions:

Split-Half

A method used in reliability testing that divides a test into two parts and compares the results for consistency to evaluate the test's reliability.

Reliability

The degree to which an assessment tool produces stable and consistent results.

Triarchic Theory

A theory of intelligence proposing that human intelligence comprises analytical, creative, and practical components.

Multiple Intelligences

A theory proposed by Howard Gardner, suggesting that individuals have different kinds of intelligences, such as linguistic, mathematical, musical, and spatial.