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A company has a market value of equity of $252,710, and a market value of debt...

A company has a market value of equity of $252,710, and a market value of debt of $206,740. The company's levered cash flow (i.e. cash flow after paying all interest) is $37,045 and is distributed annually as dividends in full. The interest rate on the debt is 6.82%. You own $32,730 worth of the market value of the company's equity. Assuming that the levered cash flow is constant in perpetuity and there are no taxes, what is your annual expected return on this investment?

13.19%

13.56%

13.93%

14.29%

14.66%
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