Question
Suppose you borrow $44640.49M when financing a gym with a cost of $88572.56M. You expect to generate a cash flow of $76391.18M at the end
Suppose you borrow $44640.49M when financing a gym with a cost of $88572.56M. You expect to generate a cash flow of $76391.18M at the end of the year if demand is weak, $92717.37M if demand is as expected and $119311.07M if demand is strong. Each scenario is equally likely. The current risk-free interest rate is 5.91% (risk of debt) and there's a 13.68% risk premium for the risk of the assets. What would be the realized return of equity if the demand is strong?
(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.
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