Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. imagine you borrow $45,000 m when financing a gym

Imagine you borrow $45,000 M when financing a gym that has a cost $250,000M. You...

60.1K

Verified Solution

Question

Finance

Imagine you borrow $45,000 M when financing a gym that has a cost $250,000M. You expect to generate a cash flow of $32,000 M at the end of the year if demand is weak, $96,000 M if demand is as expected and $13,689,000 M 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)

ANSWER IN PERCENTAGE FOR PERCENTAGE ANSWERS. If your answer is 0.0405, then answer 4.05. DO NOT USE %.

ANSWER IN MILLIONS FOR NUMERICAL NUMBERS, USE FOUR DECIMALS. If your answer is 100M you must enter 100.0000, for 20M you must enter 20.000, etc

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?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Computing the standard deviation for a portfolio of two risky? investments) Mary Guillot recently graduated from...

Programming
1.2K views

ArrayStack.java

Basic Math
1.2K views

Suppose you have selected a random sample of ?=13 measurements from a normal distribution. Compare the...

Biology
1.2K views

The site of contact between a synaptic terminal of a neuron and a target cell...

Physics
1.2K views

A battery of e m f 2 volts and internal resistance 0 10 is being...

Basic Math
1.2K views

Find the equation of the quadratic function f whose graph is shown below 3 4...

Accounting
1.2K views

Harden, Inc., has budgeted sales in units for the next five months as follows June...

Accounting
1.2K views

Prepare AJE's, T accounts and prepare financial statements for Nov 30, 2020 (Balance Sheet, I/S...

Accounting
1.2K views

Forcum Company reports the following information (in millions) during a recent year: net sales, $12,408.5;...

Accounting
1.2K views

(a1) (itsi2) - Tonbeckand Mudie Allenota oes 3 uled (a)

Accounting
1.2K views

Chris Smith will receive $76,800 on 5 years from now, from a trust fund established...

Finance
1.2K views

Rosie Malone sold her house to D.M. Eand. The contract was signed on June 1,...