Question
Edwards Construction currently has debt outstanding with a market value of $390,000 and a cost of 7 percent. The company has an EBIT of $27,300
Edwards Construction currently has debt outstanding with a market value of $390,000 and a cost of 7 percent. The company has an EBIT of $27,300 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?
b. What is the equity value and the debt-to-value ratio if the company's growth rate is 3 percent?
c. What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent? (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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