Rivian, a new electric vehicle maker, just went public and they are trying to determine a reasonable MARR for their young industry. Currently, they can borrow small amounts of money at 9.5% interest and they have heard from their initial private venture capitalists that they want an average return of 25%. However, going forward, they will not have to meet the expectations of the venture capitalists as they are selling stock in the stock market that has returned about 15% return average for the last several years. What do you think you would recommend for a MARR Range? D. Recommend a 10% MARR because that is higher than your borrowing rate A. Recommend a 5% MARR because you are a new company and investors can't expect much B. Recommend a 30% MARR because if you are ever going to have to catch up with Tesla, it needs to be high C. Recommend a 18% MARR because you need to be slightly higher than the stock market returns to cover risk
Rivian, a new electric vehicle maker, just went public and they are trying to determine a reasonable MARR for their young industry. Currently, they can borrow small amounts of money at 9.5% interest and they have heard from their initial private venture capitalists that they want an average return of 25%. However, going forward, they will not have to meet the expectations of the venture capitalists as they are selling stock in the stock market that has returned about 15% return average for the last several years. What do you think you would recommend for a MARR Range? D. Recommend a 10% MARR because that is higher than your borrowing rate A. Recommend a 5% MARR because you are a new company and investors can't expect much B. Recommend a 30% MARR because if you are ever going to have to catch up with Tesla, it needs to be high C. Recommend a 18% MARR because you need to be slightly higher than the stock market returns to cover risk
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....
Related questions
Question
Pls help
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you