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

question 76

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 40%.
-Luther's weighted average cost of capital is closest to:

• A)9.8%
• B)10.8%
• C)11.5%
• D)13.0%

---

Definitions:

Obsolescence

The process of becoming outdated or no longer used, often as a result of new inventions, technologies, or changes in consumer preference.

Cash Payback Period

The length of time it takes for an investment to generate enough cash flow to recover the initial investment cost.

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period, representing the overall change in its cash position.

Average Rate of Return

A financial ratio that compares the average annual profit of an investment to its initial cost, often used to assess the profitability of an investment over time.