Analysts expect the Rumpel Felt Company to generate EBIT of $9.2 million annually in perpetuity...
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Analysts expect the Rumpel Felt Company to generate EBIT of $9.2 million annually in perpetuity (starting in one year). Rumpel is all equity financed and its stockholders require a return of 4.9%.The value of Rumpel is $187.76 million. If Rumpel borrows $78 million (interest-only in perpetuity) with a cost of debt of 2.4%,then what return will the stockholders require?
Note:
Assume that there are no taxes.
The required return will be ___%.
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