4. Lolas Dance Studio currently has debt outstanding with a market value of $100,000 and a cost of 8 percent. The company has EBIT of $8,000 that is expected to continue in perpetuity. Assume there are no taxes.

I. What is the value of the company's equity?

A. $50,000

B. $100,000

C. $1,000,000

D. $0

E. Impossible to calculate with information given.

II. What is the debt-to-value ratio?

A. 1.0

B. 1.9

C. 0.5

D. 1.26

E. Impossible to calculate with information given.

III. What are the equity value and debt-to-value ratio if the company's growth rate is 3 percent?

A. 1.000

B. 0.954

C. 0.641

D. 1.263

E. Impossible to calculate with information given.

IV. What are the equity value and debt-to-value ratio if the company's growth rate is 7 percent?

A. 1.000

B. 0.954

C. 0.641

D. 1.263

E. Impossible to calculate with information given.