Bluegrass Mint Company has a debt-equity ratio of .25. Therequired return on the company’s unlevered equity is 11.9 percentand the pretax cost of the firm’s debt is 5.7 percent. Salesrevenue for the company is expected to remain stable indefinitelyat last year’s level of $18,800,000. Variable costs amount to 65percent of sales. The tax rate is 22 percent and the companydistributes all its earnings as dividends at the end of eachyear.

a. If the company were financed entirely by equity, how muchwould it be worth? (Do not round intermediate calculations andenter your answer in dollars, not millions of dollars, rounded to 2decimal places, e.g., 1,234,567.89)

b. What is the required return on the firm’s levered equity? (Donot round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.)

c-1. Use the weighted average cost of capital method tocalculate the value of the company. (Do not round intermediatecalculations and enter your answer in dollars, not millions ofdollars, rounded to 2 decimal places, e.g., 1,234,567.89)

c-2. What is the value of the company’s equity? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

c-3. What is the value of the company’s debt? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

d. Use the flow to equity method to calculate the value of thecompany’s equity. (Do not round intermediate calculations and enteryour answer in dollars, not millions of dollars, rounded to 2decimal places, e.g., 1,234,567.89)