Firm U is an all equity firm and has a market value of $100,000 and EBIT of
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Question:
a) Ryan is the holder of $9,000 worth of L's stock. What rate of return can he expect, assuming a dividend pay-out of 100%?
b) Using homemade leverage, show how Ryan could generate exactly the same cash flows and rate of return by investing in Firm U.
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
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