If Wyatt adjusts its debt continuously to maintain a constant debt-equity ratio of 50%,then the value of this new project is closest to:
A)$188 million
B)$188.5 million
C)$320 million
D)$340 million

Question

Quizplus · Accepted Answer

A)r_wacc = r_u - dT_cr_d where d = 11ea7cce_3cb4_f24f_928c_d75e53148606_TB1626_11 ,so r_wa_cc = 11% - 11ea7cce_3cb5_1960_928c_43df9c94df10_TB1626_11 (35%)(6%)= 10.3% The cash flows from this project follow a growing perpetuity,therefore value = 11ea7cce_3cb5_4071_928c_df46f7dc5892_TB1626_11 = 11ea7cce_3cb5_4072_928c_2d055ec2075d_TB1626_11 = $187.96 million

If Wyatt Adjusts Its Debt Continuously to Maintain a Constant