Use the Information for the Question(s)below

question 89

Multiple Choice

Use the information for the question(s) below.
Suppose Luther Industries is considering divesting one of its product lines.The product line is expected to generate free cash flows of $2 million per year,growing at a rate of 3% per year.Luther has an equity cost of capital of 10%,a debt cost of capital of 7%,a corporate tax rate of 21%,and a debt-equity ratio of 2.This product line is of average risk and Luther plans to maintain a constant debt-equity ratio.
-Luther's unlevered cost of capital is closest to:

• A)8.0%.
• B)8.5%.
• C)9.0%.
• D)6.4%.

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Definitions:

Heterosexuals

People who seek emotional-sexual relationships with members of the other gender.

Emotional Support

Assistance provided through empathy, caring, and encouragement to help individuals cope with stress or emotional challenges.

Intellectual Stimulation

The process of encouraging others to think critically and creatively, challenging them to engage in problem-solving and innovative thinking.

Friendship

A close and supportive relationship between two individuals, characterized by mutual affection, trust, and a sense of solidarity.