Question
1. The asset beta for an art gallery is 1.9. The risk free rate is 2.2%, an S&P500 index fund returns 11.5%, and the tax
1. The asset beta for an art gallery is 1.9. The risk free rate is 2.2%, an S&P500 index fund returns 11.5%, and the tax rate is 27%.
a. If you are opening an art gallery, what would your unlevered cost of capital be?
b. If you can borrow at 4%, and your firm is financed with 60% debt, 40% equity, what is your levered cost of equity?
c. If setting up your art gallery costs $1M today, and will produce $125,000 in EBIT per year for the next 25 years, what is the NPV of opening the gallery, using the WACC method?
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Cases In Healthcare Finance
Authors: Louis C. Gapenski, George H. Pink
4th Edition
1567933424, 978-1567933420
