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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
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. 10) 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% 11) If Flagstaff currently maintains a 5 debt to equity ratio, then Flagstaff's after-tax WACC is closest to: A) 10.00% B) 10.51%. C) 9.50%. D) 8.75% 12) If Flagstaff currently maintains a 5 debt to equity ratio, then the value of Flagstaff's interest tax shield is closest to: A) $7 million. B) $18 million C) $10 million. D) $24 million
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