alternative.An entrepreneur asks for $100,000 to buy a diagnostic machine for a healthcare facility.
The entrepreneur hopes to keep up as a lot fairness within the firm, but the Angel Investor requires the transaction to be financed with 60% debt and 40% fairness.
Because the Angel Investor, you assign a price of fairness of 16% and a price of debt at 9%. Primarily based on 12 months 1 gross sales projections the entrepreneur assures you, the Angel Investor, a Return on Funding (ROI) of 9%; conceptually this may cowl the primary 12 months’s pretax value of debt and permit for deliberate fairness development and a refinancing mannequin for 12 months 2. You’ll use an After Tax Weighted Common Price of Capital (AT- WACC) mannequin which incorporates the after tax value of debt and proportionate prices of Debt vs. Fairness. A 35% marginal tax price is utilized.Get accounting project homework Help
