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

question 25

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 after-tax debt cost of capital is closest to:

• A)4.2%
• B)5.4%
• C)7.0%
• D)9.8%

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Definitions:

Growth Rate

The rate at which a particular variable, such as an economy or a population, increases over a specified period.

Net Migration

Net effect of immigration and emigration on a particular population; expressed as an increase or decrease.

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Study of the size, composition, distribution, and changes in human population.

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A nationwide survey conducted every ten years by the federal government to account for the population and gather demographic information used for various purposes, including political representation.