The entrepreneur asks for $100,000 immediately to purchase a diagnostic machine for a healthcare facility. The entrepreneur hopes to be financed with 60 percent debt and 40 percent equity. As the entrepreneurs' venture capital partner, you assign a cost of equity of 15% and a cost of debt at 10%. You require a Return on Investment (ROI) of 8%. You are using an After Tax Weighted Average Cost of Capital (AT- WACC) model. A 35% marginal tax rate is applied Address the following checklist items:

Checklist:

• Explain the tax benefits of debt financing.
• Calculate the AT- WACC with a 60% debt and 40% equity financing structure.
• Apply the calculated AT-WACC to explain why this is or is not a viable investment for you as the Angel Investor.
• Explain what the entrepreneur's financial restructuring AT- WACC (% Debt and % Equity) need to be in order to create a positive ROI.
• Explain why you as the Angel Investor would require more or less debt versus equity financing. Be sure to note the nature of the claims on assets in times of a bankruptcy.