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%

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Definitions:

Net Income

The total earnings calculated by subtracting total expenses from total revenues, indicating the company's profit.

Invoice Cost

Invoice cost refers to the amount shown on the invoice from a supplier, including the cost of the goods purchased and any additional fees or shipping costs.

Installation

The process of setting up equipment, machinery, or software to make it ready for use.

Machinery Account

A ledger account that tracks the acquisition cost, depreciation, and disposal of machinery, reflecting its financial impact on a business.