Use the Information for the Question(s)below

question 13

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 debt to equity ratio of 1,then Flagstaff's pre-tax WACC is closest to:

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

---

Definitions:

Mental Activity

The operation of the mind through processes like thinking, learning, memory, perception, and problem-solving.

Goods

Tangible items that are produced, bought, or sold, serving as objects of commerce and economic transactions.

Services

Activities or functions that are provided by individuals or organizations to fulfill the needs or wants of others.

Offshoring

Sending work or jobs to another country to cut a company’s costs at home (sometimes called international outsourcing and offshore outsourcing).