Hey fellas, a couple of the guys in my city's networking groupchat (it'd be generous to describe these oafs as friends) started a Youtube channel and apparently they're able to solve for levered return really fast. They shared their first video in the gc earlier this evening.
(This is their video for reference)
Is anyone able to verify the math here? I'm not really sure how to solve this (I've been banging my head against a wall for 30 minutes, before you clown me, 100% sure we didn't learn this at Kellogg, let alone undergrad). None of my M7 mates in the gc can either. I would love to prove them wrong - would appreciate the help of fellow monkeys.
I feel like this is super basic… but yes, your friends did calculate it incorrectly. It’s 9.25%.
How do these people graduate from B School lol
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Explain to me how you got to 9.25% please wtf
Do you take (1.5% x 3) + 6.0% less 0.25% for taxes? I couldn’t follow the explanation in the video but I’m pretty sure it’s wrong anyways
What are you guys talking about? It’s 10.5% (assuming 4.5% leverage is after tax). All this is saying is that the unlevered cost of capital is the weighted average cost of capital between debt and equity… That’s also assuming no amortization, but as a quick back of the envelope cost of equity it’s correct.
It’s literally 10.5% - are you guys serious??
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