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A company has a market value of equity of $550,910, and a market value of debt of $465,460. The company's levered cash flow (i.e. cash
A company has a market value of equity of $550,910, and a market value of debt of $465,460. The company's levered cash flow (i.e. cash flow after paying all interest) is $91,295 and is distributed annually as dividends in full. The interest rate on the debt is 10.18%. You own $69,830 worth of the market value of the company's equity. Assuming that the levered cash flow is constant in perpetuity and there are no taxes, what is your annual expected return on this investment?
15.33% | |
| 15.74% |
| 16.16% |
| 16.57% |
| 16.99% |
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