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Bond issuance: 20% of total funds, requires 15% interest per year Bank loan: 60% of total funds, requires 9.5% interest per year Preferred Stock issuance: 20% of total funds, requires 5% dividend per year What is Valentino’s average rate of return on the new project?

Answer :

Parrain

Answer: 28.57%

Explanation:

Average return given the variables will be;

[tex]Average rate of return = \frac{Annual net income}{Average investment}[/tex]

Average rate of return = [tex]\frac{1,000,000}{\frac{7,000,000}{2} }[/tex]

Average rate of return  = 1,000,000/3,500,000

Average rate of return = 28.57%

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