Question
I am an angel investor in this scenario and an entrepreneur approaches me and wants me to go into an investment of $100,000 to be
I am an angel investor in this scenario and an entrepreneur approaches me and wants me to go into an investment of $100,000 to be financed with 60% debt and 40% equity. I assigned a cost of equity of 15% and a cost of debt at 10% and I also require an 8% return on investment (ROI). There is a 35% marginal tax rate that is applied too. Using the AT-WACC model I realize that it will be 9.9% and I need it to be 8% or lower.So the question is: explain what the entrepreneur's financial restructuring needs to be using AT-WACC ( % of debt and % of equity) need to be in order to create a positive ROI.
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