Use the Information for the Question(s) Below

question 28

Multiple Choice

Use the information for the question(s) below.
Flagstaff Enterprises is 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 is in the 35% corporate tax bracket.
-If Flagstaff currently maintains a .5 debt to equity ratio,then Flagstaff's after-tax WACC is closest to:

• A) 10.00%
• B) 10.20%
• C) 9.50%
• D) 8.75%

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