Question 6

Suppose a firm faces the following costs of capital:

	Proportion in Capital Structure	Pretax Cost	Tax Effect	After-tax Cost	Weighted Average Cost of Capital
					Pretax	After Tax
Debt	.33 .40	12%	.35	4.2%	4.8	2.00%
Equity	.67 .65	20%	--	20%	13.00%	13.00%
	1.00				17.20%	15%

Assume that this firm expects to generate $95 million of pretax-free cash flows.

What would be the after-tax free cash flows one year from today?

	a.	$41,500,000
	b.	$65,820,000
	c.	$61,750,000
	d.	$59,350,000