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

question 32

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 marginal corporate tax rate is 35% 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 once per year 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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