Question
Bluegrass Mint Company has a debt-equity ratio of .30. The required return on the companys unlevered equity is 13.2 percent and the pretax cost of
Bluegrass Mint Company has a debt-equity ratio of .30. The required return on the companys unlevered equity is 13.2 percent and the pretax cost of the firms debt is 7 percent. Sales revenue for the company is expected to remain stable indefinitely at last years level of $20,100,000. Variable costs amount to 70 percent of sales. The tax rate is 25 percent and the company distributes all its earnings as dividends at the end of each year. |
a. | If the company were financed entirely by equity, how much would it be worth? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
b. | What is the required return on the firms levered equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
c-1. | Use the weighted average cost of capital method to calculate the value of the company. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
c-2. | What is the value of the companys equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
c-3. | What is the value of the companys debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
d. | Use the flow to equity method to calculate the value of the companys equity. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) |
Note: the answer for part a is $34,261,363.64----- the rest are wrong, please get them right as I am reposting this question again and this is my LAST question I can post this billing period. Please please please don't submit unless 100% sure
Thank you and have a blessed day :)
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