Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose you borrow $59.105.11 M when financing a gym which cost is at $90.209.77M. You expect to generate a cash flow of $74.458.23M at the
Suppose you borrow $59.105.11 M when financing a gym which cost is at $90.209.77M. You expect to generate a cash flow of $74.458.23M at the end of the year if demand is weak. $95,881.43M if demand is as expected and $113,134.32M if demand is strong. Each scenario is equally likely. The current risk-free interest rate is 5.04% (risk of debt) and there's a 10% 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. Suppose you borrow $59.105.11 M when financing a gym which cost is at $90.209.77M. You expect to generate a cash flow of $74.458.23M at the end of the year if demand is weak. $95,881.43M if demand is as expected and $113,134.32M if demand is strong. Each scenario is equally likely. The current risk-free interest rate is 5.04% (risk of debt) and there's a 10% 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started