If total return after tax on a certain project is 7.5% and there are 5 financing choices available to investors:
1) 7% interest rate and 60% LTV ratio
2) 7.8% interest rate and 70% LTV ratio
3) 8.5% interest rate and 80% LTV ratio
4) 9.25% interest rate and 90% LTV ratio
5) 9.75% interest rate and 95% LTV ratio
Supposed that there are 3 types of investors (A, B, C) whose tax rates are 15%, 25%, and 35% respectively
1) find out the financing choice for each type of investor and the corresponding after-tax return on equity
2) Which type of investor has the highest after-tax return on their equity?