Question
Using excel please solve the following: Joes Party Supply, Inc., currently has debt outstanding with a market value of $30.5 million and a yield to
Using excel please solve the following:
Joes Party Supply, Inc., currently has debt outstanding with a market value of $30.5 million and a
yield to maturity of 6%. The company has an optimal (market value) debt-to-equity ratio of 0.37,
and the required return on equity is 11%. EBIT for Joes next year is projected to be $12.5 million,
and is expected to grow at 10% per year for the next four years before slowing to 3% growth in
perpetuity. Change in net working capital, capital spending (capex), and depreciation as a
percentage of EBIT are expected to be 9%, 15%, and 8%, respectively. Joes tax rate (applicable
to EBIT) is 38%. Joes has 1.85 million shares outstanding: what is each one worth?
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