Question
25. A new business requires a $20,000 investment today, and will generate a one-time cash flow of $25,000 after one year. The business will be
25. A new business requires a $20,000 investment today, and will generate a
one-time cash flow of $25,000 after one year. The business will be financed with
50% equity and 50% debt. If the firm can borrow at 7%, what is the return on
levered equity?
a) 43%
b) 25%
c) 18%
d) 7%
answer is A, could you please give me the solution steps?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
