caption: Example 16.1a The Risk and Return of Levered Equity Problem: Suppose you borrow $50,000 when financing a coffee shop which is valued at $75,000. You e
exif: {"Image DocumentName": "Example 16.1a The Risk and Return of Levered Equity", "Image ImageDescription": "Problem: Suppose you borrow  50,000 when financing a coffee shop which is valued at  75,000. You expect to generate a cash flow of  75,000 at the end of the year if demand is weak,  84,000 if demand is as expected and  93,000 if demand is strong. Each scenario is equally likely. The current risk-free interest rate is 4%, and there\u2019s an 8% risk premium for the risk of the assets. According to Modigliani and Miller, what should the value of the equity be? What is the expected return? 22.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}