Use the Information for the Question(s)below

question 74

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 as an all-equity firm would be closest to:

• A)$73 million.
• B)$80 million.
• C)$115 million.
• D)$100 million.

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and a potential say in company decisions.

Cash

Liquid currency or assets that can be immediately used to make transactions or settle debts.

Day-to-day Expenses

Regular and routine expenses that are necessary for the daily operations of an individual or organization, such as groceries or office supplies.

Major Purpose

The primary reason or objective behind an action, strategy, or existence of an entity or project.