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

question 39

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)Many practitioners analyze other financial characteristics of a firm,when they forecast betas.
• B)U.S.Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon.
• C)If a firm where to change industries,using its historical beta would be inferior to using the beta of other firms in the new industry.
• D)When using historical returns to forecast future betas,we must be mindful of changes in the environment that might cause the future to differ from the past.

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Definitions:

Reality's Messiness

The complex and often disorderly nature of real-life situations, characterized by unpredictability and uncontrollable variables.

Ascribed Status

A social status assigned at birth or assumed involuntarily later in life, not a result of personal effort or achievement.

Professional Status

The standing or regard of a person's occupation, based on factors such as education, income, and perceived societal importance.

Involuntarily

Occurring without the individual's conscious choice, often referring to actions or reactions that are automatic or outside personal control.