In: Finance
Edwards Construction currently has debt outstanding with a
market value of $310,000 and a cost of 6 percent. The company has
an EBIT of $18,600 that is expected to continue in perpetuity.
Assume there are no taxes.
a. What is the value of the company’s equity and
the debt-to-value ratio? (Do not round intermediate
calculations. Leave no cells blank - be certain to enter "0"
wherever required. Round your debt-to-value answer to 3 decimal
places, e.g., 32.161.)
Equity value | $ |
Debt-to-value | |
b. What is the equity value and the debt-to-value
ratio if the company's growth rate is 3 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 | |
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 |