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:

Mark W. Felt

An Associate Director of the FBI who was later revealed to be the informant known as "Deep Throat," providing crucial information about the Watergate scandal to the press.

Deep Throat

The pseudonym of W. Mark Felt, the secret informant who provided information to journalists about the Watergate scandal.

Nixon's Resignation

The event on August 8, 1974, when President Richard Nixon resigned from office due to the Watergate scandal, becoming the only U.S. president to do so.

CIA

The Central Intelligence Agency, a civilian agency of the United States federal government, is responsible for collecting, processing, and analyzing information related to national security.