Project #97511 - finance

Working with Different Capital Structures.  A Bowling Alley rented by a long-term tenant is up for sale in a in your neighborhood for $2.4 million. The net operating income from the property is projected to be constant at $228,000 per year.   As an Entrepreneur, you’re exploring different capital structure.

Q2(a). If you paid using 100% Entrepreneurial Equity, what would the return on your Entrepreneurial Equity be?  Show your work.

Q2(b). You find a bank which is willing to make an interest-only loan of $1.7 million at a rate of 7.00%.  What is your return on your Entrepreneurial Equity now?  Show your work.

Q2(c). You find an investor who is willing to supply $550,000 of Investor Equity in exchange for a simple return of 13% per year on their equity.

With both the Bank and the Investor Equity in the deal, what is the rate of return on your Entrepreneurial Equity?  Show your work (a table may be helpful but is not required).

Subject Business
Due By (Pacific Time) 12/02/2015 03:40 pm
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