Capital Structure and Growth Edwards Construction currently has debt outstanding with a market value of $80,000 and a cost of 12 percent. The company has an EBIT rate of $9,600 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 5 percent?

c. What are the equity value and debt-to-value ratio if the company’s growth rate is 10 percent? LO.1