Discount Rate Higher for Leveraged Deals?
I am looking at two proformas for one investment and noticed the following:
1. The discount rate is 10 percent for an un-leveraged investment on the proforma and yields an IRR of 11 percent.
2. The discount rate is 15 percent for a leveraged investment on a proforma and yields an IRR of 69 percent.
Question: Why is the discount rate higher on a leveraged investment than that of an un-leveraged investment?
Question: Why do the unleveraged deal show a lower discount rate then the leveraged deal?
Thanks.