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An all-equity financed company has a cost of capital of 10 percent. It owns one asset a mine capable of generating $114 million in free

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An all-equity financed company has a cost of capital of 10 percent. It owns one asset a mine capable of generating $114 million in free cash flow every year for five years, at which time it will be abandoned. A buyout firm proposes to purchase the company for $400 million financed with $350 million in compound interest debt to be repaid in five, equal, end-of-year payments and carrying an interest rate of 10.0 percent. a. Calculate the annual debt service payments required on the debt. b. Ignoring taxes, estimate the rate of return to the buyout firm on the acquisition after debt service. Note: Round your answer to 1 decimal place

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