Weighted average cost of capital is closest

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Reference no: EM131182591

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 target capital structure is the same as indicated by current market conditions.

Luther's weighted average cost of capital is closest to:

A) 11.5%

B) 10.8%

C) 9.8%

D) 13.0%

Reference no: EM131182591

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