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Edwards Construction currently has debt outstanding with a market value of $420,000 and a cost of 5 percent. The company has an EBIT of $21,000
Edwards Construction currently has debt outstanding with a market value of $420,000 and a cost of 5 percent. The company has an EBIT of $21,000 that is expected to continue in perpetuity. Assume there are no taxes.
a. What is the value of the company's equity and the debt-to-value ratio? (Do not round intermediate calculations. Round your equity value to 2 decimal places (e.g., 32.16), and round your debt-to- value answer to 3 decimal places (e.g., 32.161) Equity value Debt-to-value b. Assume that the company's growth rate is 3 percent. What is the value of the company's equity and the debt-to-value ratio now? (Do not round intermediate calculations. Round your equity value to 2 decimal places (e.g., 32.16), and round your debt-to-value answer to 3 decimal places (e.g., 32.161).) Equity value Debt-to-value c. Assume that the company's growth rate is 4 percent. What is the value of the company's equity and the debt-to-value ratio now? (Do not round intermediate calculations. Round your equity value to 2 decimal places (e.g., 32.16), and round your debt-to-value answer to 3 decimal places (e.g., 32.161).) Equity value Debt-to-valueStep by Step Solution
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