Use the Information for the Question(s)below

question 10

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

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

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Definitions:

Hotel Rooms

Accommodation units within a hotel, providing guests with a private space that includes bedding and bathroom facilities.

Condominiums

A form of living space similar to apartments, but individually owned within a complex where common areas and facilities are shared among residents.

Sacajawea

A Lemhi Shoshone woman who assisted the Lewis and Clark Expedition, serving as an interpreter and guide in the early 1800s.

Lewis and Clark

Two explorers, Meriwether Lewis and William Clark, who led an expedition from 1804 to 1806 across the Western United States to explore lands acquired in the Louisiana Purchase.