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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 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:
A)$25 million.
B)$60 million.
C)$45 million.
D)$40 million.

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The Answer of Use the information for the question(s)below.
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 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:
A)$25 million.
B)$60 million.
C)$45 million.
D)$40 million.

Use the Information for the Question(s)below