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

question 32

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%.
-Which of the following statements is FALSE?

• A)The CAPM states that we should use the risk-free interest rate corresponding to the investment horizon of the firm's investors.
• B)To determine the risk premium for a stock using the security market line,we need an estimate of the market risk premium.
• C)When surveyed,the vast majority of large firms and financial analysts reported using the yields of Treasury Bills to determine the risk-free rate.
• D)The risk-free interest rate is generally determined using the yields of U.S.Treasury securities,which are free from default risk.

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Definitions:

Subpersonalities

Different aspects of a person's character or personality, each with its own viewpoints, desires, and motivations.

Doubling

In psychology or neuroscience, does not denote a specific universally recognized term but could imply processes where entities increase in number, frequency, or intensity.

Depersonalization

A condition where one feels detached from one's thoughts, feelings, and body, often described as feeling like an outside observer of oneself.

Sympathetic Nervous System

Part of the autonomic nervous system responsible for the body's 'fight or flight' response to stressful situations.