What is the flow-to-equity for the purchase

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Mycroft Development is considering a proposal to purchase a land for $250,000. The firm plans to borrow $150,000 on a 3-year bullet loan at 10% (interest paid at end of each year with the whole principal due at the maturity of loan). EBIT are expected to be $46,875 each year for 3 years. The after-tax salvage value of the land at the end of year 3 is $275,000. If the levered cost of equity is 20% and the tax rate is 36%, what is the FTE (flow-to-equity) for the purchase?

Reference no: EM131973262

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