So let's say I've got a company that needs an equity or even debt infusion for a project, and I'm proposing to charge them 4% of all the equity I raise. They are balking thinking about how much they will make off of that money vs how much I will. I am trying to put together a case study showing that a company that raises say $100m, will expect to earn roughly 20% pre-tax on that money, per year ($19.2m a year), for at least a certain length of years. The investment bank will take $4M in fees from the deal, and has their own assumed rate of return, which they may even roll into the equity of the company. So the investment bank is getting roughly 20% of the profits from the proceeds. Maybe you can help me come up with a more concrete example of the high cost of money (in terms of the ratio of what the intermediary charges and what the company earns)?
Thanks, and sorry if the question comes out vague and poorly-worded, I'm doing my best to explain it.