Use the Information for the Question(s)below

question 69

Multiple Choice

Use the information for the question(s) below.
Luther Industries has no debt and expects to generate free cash flows of $48 million each year.Luther believes that if it permanently increases its level of debt to $100 million,the risk of financial distress may cause it to lose some customers and receive less favorable terms from its suppliers.As a result,Luther's expected free cash flows with debt will be only $44 million per year.Suppose Luther's tax rate is 21%,the risk-free rate is 6%,the expected return of the market is 14%,and the beta of Luther's free cash flows is 1.25 (with or without leverage) .
-The value of Luther without leverage is closest to:

• A)$315 million.
• B)$300 million.
• C)$205 million.
• D)$340 million.

---

Definitions:

Elias

May refer to a person's name or in specific contexts, a scholar or notable figure in a particular field.

Endless Rules

A situation characterized by an excessive number of regulations or guidelines, often perceived as overly restrictive or unnecessarily complicated.

Media Police Types

Refers to the various portrayals and roles of law enforcement in media, including the stereotypes and archetypes that influence public perception.

Regulations

Rules, laws, or directives made and maintained by an authority to regulate conduct in a particular area or activity.