19 Capital Structure and Growth Transvaal Ltd currently has debt outstanding with a market value of R980,000

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19 Capital Structure and Growth Transvaal Ltd currently has debt outstanding with a market value of R980,000 and a cost of 10 per cent. The company has an EBIT of R98,000 that is expected to continue in perpetuity. Assume there are no taxes.

(a) What is the value of the company’s equity? What is the debt-to-value ratio?

(b) What are the equity value and debt-to-value ratio if the company’s growth rate is 4 per cent?

(c) What are the equity value and debt-to-value ratio if the company’s growth rate is 8 per cent?

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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Question Posted: Jul 19, 2024 05:05 PM

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19 Capital Structure and Growth Transvaal Ltd currently has debt outstanding with a market value of R980,000

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Corporate Finance

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