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36.36 was the wrong answer with the hint given. of its product lines. The product line is expected to generate free cash flows of $2
36.36 was the wrong answer with the hint given.
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 corporate tax rate of 21%, and a debt-equity ratio of 2. This product line is of average risk and Luther plans to maintain a constant debt-equity ratio. The unlevered value of Luther's product line is closest to: $40 million. $49.75 million. $25 millionStep by Step Solution
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