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Generate a one-time cash flow

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A new business requires a $20,000 investment today, and will generate a one-time cash flow of $25,000 after one year. The business will be financed with 50% equity and 50% debt. If the firm can borrow at 7%, what is the return on levered equity?

a) 43%

b) 25%

c) 18%

d) 7%

Answer is A, could you please give me the solution steps?

Reference no: EM131950725

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