If Wyatt adjusts its debt once per year 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

B)r_wacc = r_u - dT_cr_d 11ea7cce_3cb5_8e93_928c_952f7300225c_TB1626_11 where d = 11ea7cce_3cb5_8e94_928c_e15311885f20_TB1626_11 ,so r_wacc = 11% - 11ea7cce_3cb5_b5a5_928c_114f8c2932c8_TB1626_11 (35%)(6%) 11ea7cce_3cb5_b5a6_928c_bd3f1e180a81_TB1626_11 = 10.267% The cash flows from this project follow a growing perpetuity,therefore value = 11ea7cce_3cb5_b5a7_928c_2b2be8c85c47_TB1626_11 = 11ea7cce_3cb5_dcb8_928c_a9e92251664d_TB1626_11 = $188.44 million

If Wyatt Adjusts Its Debt Once Per Year to Maintain