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Title: Suppose Luther Industries is considering divesting one of its product lines. The product line is ... Post by: EpiscoWhat on Nov 20, 2017 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?
Title: Re: Suppose Luther Industries is considering divesting one of its product lines. The product line ... Post by: pbrown223 on Nov 20, 2017 Content hidden
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