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You are a commercial real estate broker eager to sell an office building. An investor is interested but demands 30% on his equity investment. The building's selling price is $32 million, and it promises free cash flows of $3.5 million annually in perpetuity. Interest only financing is available at %9 interest; that is, the debt is outstanding forever and requires no principal payments. The tax rate is 35%. How much of the purchase price should the investor borrow to meet his goal?

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Financial Management, Finance

Category:- Financial Management
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