Question: Please answer A-D as same question content. Suppose you borrow $24,000M when financing a gym that has a cost $250,000M. You expect to generate a
Please answer A-D as same question content.

Suppose you borrow $24,000M when financing a gym that has a cost $250,000M. You expect to generate a cash flow of $15,000M at the end of the year if demand is weak, $63,000M if demand is as expected and $800,000M if demand is strong. The current risk-free interest rate is 6% (risk of debt) and there's a 10% risk premium for the risk of the assets. (HINT: If you need it, to compute the WACC of the firm, add the risk free plus the risk premium) a. What should the value of the equity be? b. What is the expected return of equity? c. What would be the return of equity if the demand is strong? d. What would be the return of equity if the demand is weak
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
