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Mulligan Manufacturing (MM) is a fast growing firm with expected earnings of $3 million next year....

  1. Mulligan Manufacturing (MM) is a fast growing firm with expected earnings of $3 million next year. MM expects earnings to grow 10% per year indefinitely and MM’s cost of capital is 14%. MM has creative accounts, so it pays no taxes. What is the market value of MM? If MM has no debt, then what is its P/E ratio? If MM has $25 million in debt with an interest rate of 8% (cost of capital (WACC) remains 14%), what is the new P/E ratio?

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Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 week ago
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