Wyatt Oil Just Reported That a Major Fire Destroyed One

question 1

Multiple Choice

Wyatt Oil just reported that a major fire destroyed one of its oil production facilities in Colorado.While the facility was fully insured,the loss of oil production will decrease Wyatt's free cash flow by $120 million at the end of this year and by $80 million at the end of next year.Wyatt has 50 million shares outstanding and has a weighted average cost of capital of 9%.Assuming the value of Wyatt's debt is not affected by this event,the expected decrease in Wyatt's stock price is closest to:

• A)$2.00.
• B)$3.55.
• C)$3.87.
• D)$4.00.

---

Definitions:

Right-Sided Heart Failure

Abnormal condition that results from impaired functioning of the right ventricle; characterized by venous congestion in the systemic circulation.

Peripheral Edema

Swelling in the outer areas of the body, such as the arms or legs, often caused by fluid buildup.

Basilar Crackles

Abnormal lung sounds heard at the base of the lungs, suggestive of conditions like pneumonia or heart failure.

Heart Sounds

The noises generated by the beating heart and the resultant flow of blood through it.