Question
Edwards Construction currently has debt outstanding with a market value of $67,000 and a WACC of 10 percent. The company has EBIT of $6,750 that
Edwards Construction currently has debt outstanding with a market value of $67,000 and a WACC of 10 percent. The company has EBIT of $6,750 that is expected to continue in perpetuity. Assume there are no taxes. (Please show all related working steps)
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 2 percent?
c. What are the equity value and debt-to-value ratio if the company's growth rate is 4 percent?
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Analysis for Financial Management
Authors: Robert Higgins
11th edition
77861787, 978-0077861780
