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Company AAA and Company ZZZ have differences in their capital structures, but other than that they are pretty much alike. In this problem you will
Company AAA and Company ZZZ have differences in their capital structures, but other than that they are pretty much alike. In this problem you will need to calculate the value of each company's Equity. Given: Company AAA: - Unlevered. - Annual income is tax-free. - \$12.9 million in EBIT is expected to be earned every year forever. - No net income is retained, and the full amount is used to pay dividends. 5.2 million shares are currently being traded in the market. Each share currently sells for $76. Company ZZZ: - Levered. - Annual income is tax-free. - $77 million is the market value of its debt. The debt has the following characteristics: neverending interest payments, 8% interest rate. - \$12.9 million in EBIT is expected to be earned every year forever. - No net income is retained, and the full amount is used to pay dividends.3.5 million shares are currently being traded in the market. Each share currently sells for $93. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
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