Use the Information for the Question(s)below

question 13

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 maintains a debt to equity ratio of 1,then Flagstaff's pre-tax WACC is closest to:

• A)11.0%.
• B)10.5%.
• C)10.0%.
• D)9.0%.

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Definitions:

Nobel Prizes

A set of annual international awards bestowed in several categories by Swedish and Norwegian institutions in recognition of academic, cultural, or scientific advances.

Ionize

The process by which an atom or a molecule acquires a negative or positive charge by gaining or losing electrons.

Alpha Particles

A type of ionizing radiation consisting of two protons and two neutrons; they are a common form of particles emitted by radioactive materials.

Gamma Rays

Electromagnetic radiation of the highest frequency and energy, emitted from atomic nuclei during radioactive decay.