Use the Information for the Question(s)below

question 28

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 marginal tax rate of 35%,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%

---

Definitions:

Nerve Impulses

Electrical signals that travel along nerve fibers, used for communication between different parts of the body.

Inorganic Salts

Chemical compounds that do not contain carbon-hydrogen bonds, often crucial for various biological functions and industrial applications.

Matrix

Unstructured semifluid substance that fills the space between cells in connective tissues or inside organelles.

Dendrites

Branch-like extensions of neurons that receive signals from other neurons.