Use the Information for the Question(s)below

question 74

Multiple Choice

Use the information for the question(s) below.
Flagstaff Enterprises 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 has a 35% corporate tax rate.
-If Flagstaff currently maintains a debt to equity ratio of 1,then the value of Flagstaff as an all-equity firm would be closest to:

• A)$73 million.
• B)$80 million.
• C)$115 million.
• D)$100 million.

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Definitions:

Outstanding Liabilities

Financial obligations or debts that a company has yet to pay off. These are recorded on the company's balance sheet.

Net Income and Losses

The total profit or loss a company experiences over a specific period, calculated as total revenues minus total expenses.

Liquidation

The process of winding up a company's financial affairs by selling off its assets to pay off its debts, ultimately leading to the company's dissolution.

Installment Program

A payment plan allowing customers to purchase goods by making a series of payments over time until the total debt is paid.