Question
Edwards Construction currently has debt outstanding with a market value of $370,000 and a cost of 6 percent. The company has an EBIT of $22,200
Edwards Construction currently has debt outstanding with a market value of $370,000 and a cost of 6 percent. The company has an EBIT of $22,200 that is expected to continue in perpetuity. Assume there are no taxes.
a.What is the value of the companys 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 companys 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 companys 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= ?
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Fundamentals of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
5th edition
205989756, 978-0205989751
