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 equations is INCORRECT?
A) xi = ![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 equations is INCORRECT? A) x<sub>i</sub> = B) R<sub>p</sub> = Σ<sub>i</sub> x<sub>i</sub>R<sub>i</sub> C) R<sub>p</sub> = x<sub>1</sub>R<sub>1</sub> + x<sub>2</sub>R<sub>2</sub> + ...+ x<sub>n</sub>R<sub>n</sub> D) E[R<sub>p</sub>] = E[Σ<sub>i</sub> x<sub>i</sub>R<sub>i</sub>]](https://d2lvgg3v3hfg70.cloudfront.net/TB1626/11ea7cce_3d1b_f1be_928c_3f9d0ab4e50c_TB1626_11.jpg)
B) Rp = Σi xiRi
C) Rp = x1R1 + x2R2 + ...+ xnRn
D) E[Rp] = E[Σi xiRi]
Correct Answer:
Verified
Correct Answer:
Verified
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