Capital Structure and Growth Edwards Construction currently has debt outstanding with a market value of $85,000 and
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Capital Structure and Growth Edwards Construction currently has debt outstanding with a market value of $85,000 and a cost of 9 percent. The company has EBIT of
$7,650 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 3 percent?
c. What are the equity value and debt-to-value ratio if the company’s growth rate is 7 percent?
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Related Book For
Corporate Finance With Connect Access Card
ISBN: 978-1259672484
10th Edition
Authors: Stephen Ross ,Randolph Westerfield ,Jeffrey Jaffe
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