Q15

Suppose you borrow $39,439.71M when financing a gym with a cost of $94,080.15M. You expect to generate a cash flow of $70,339.71M at the end of the year if demand is weak. $91,638.18M if demand is as expected and $104,624.12M if demand is strong. Each scenario is equally likely. The current risk-free interest rate is 5.949 (risk of debt) and there's a 10.95% risk premium for the risk of the assets. What would be the realized return of equity if the demand is weak? (HINT: If you need it, to compute the WACC of the firm, add the risk free plus the risk premium) NOTE: Provide your answers in Percentages. E.G. for 10.15% you must enter 10.15, for 2.05% you must enter 2.05, etc