Use the Information for the Question(s)below

question 10

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 maintains a .5 debt to equity ratio,then Flagstaff's pre-tax WACC is closest to:

• A)10.5%.
• B)11.0%.
• C)9.0%.
• D)10.0%.

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Definitions:

Trade

The exchange of goods, services, or both within and between countries.

Free Flow

The unrestricted movement or circulation of goods, services, people, and information within a system or area.

Goods and Services

Products and activities provided by businesses to satisfy the needs or wants of consumers.

Joint Venture Partners

Entities that come together to engage in a specific business venture, sharing both the profits and risks.