Use the Following Information to Answer the Question(s)below

question 91

Multiple Choice

Use the following information to answer the question(s) below.
Luther Industries has 25 million shares outstanding trading at $18 per share.In addition,Luther has $150 million in outstanding debt.Suppose Luther's equity cost of capital is 13%,its debt cost of capital is 7%,and the corporate tax rate is 21%.
-Luther's after-tax debt cost of capital is closest to:

• A)4.2%.
• B)5.5%.
• C)7.0%.
• D)9.8%.

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