Assume perfect capital markets. First Firm is considering making an investment of $183 today. If it did so, the one-year investment would pay out $241 in 12 months. First Firm will fund part of the investment with a bank loan. Specifically, it will borrow $78 at an interest rate of 0.08. The rest of the investment will be funded with equity. What is the return on levered equity in this situation?

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The return on levered equity in this situation can be calculated using the following fo... View the full answer