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%

---

Definitions:

Tardive Dyskinesia

A movement disorder that results from prolonged use of antipsychotic medications, characterized by involuntary, repetitive body movements.

Agranulocytosis

A condition characterized by the absence of granulocytes, a type of white blood cell, making the body more susceptible to infection.

Phenothiazines

A class of antipsychotic drugs used to treat mental health conditions by affecting neurotransmitter activity in the brain, with a historical significance in the treatment of schizophrenia.