Suppose Luther Industries Is Considering Divesting One of Its Product

question 93

Essay

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.If this product line is of average risk and Luther plans to maintain a constant debt-equity ratio,what after- tax amount must it receive for the product line in order for the divestiture to be profitable?

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Homeless Populations

Groups of individuals lacking stable, permanent, and appropriate housing, often facing various health and social challenges.

Care Coordination

A patient-centered approach to healthcare delivery that involves organizing patient care activities and sharing information among all participants concerned with a patient's care to achieve safer and more effective care.

Collaboration

The act of working together with one or more people in order to achieve a common goal.

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Support and therapeutic services provided within a school setting to support students' educational and developmental needs.