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

question 83

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 continuously to maintain a constant debt-equity ratio of 50%,then the value of this new project is closest to:

• A) $240 million
• B) $320 million
• C) $340 million
• D) $445 million

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Definitions:

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A straightforward proposal or recommendation given to someone without subtlety or implication.

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