Edwards Construction currently has debt outstanding with a market value of $430,000 and a cost of...

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Finance

Edwards Construction currently has debt outstanding with amarket value of $430,000 and a cost of 6 percent. The company hasan EBIT of $25,800 that is expected to continue in perpetuity.Assume there are no taxes.

a. What is the value of the companyâ€™s equity andthe debt-to-value ratio? (Do not round intermediatecalculations. Leave no cells blank - be certain to enter \"0\"wherever required. Round your debt-to-value answer to 3 decimalplaces, e.g., 32.161.)
Equity value $
Debt-to-value

b. What is the equity value and the debt-to-valueratio if the company's growth rate is 4 percent? (Do notround intermediate calculations. Round your equity value to 2decimal places, e.g., 32.16, and round your debt-to-value answer to3 decimal places, e.g., 32.161.)
Equity value $
Debt-to-value

c. What is the equity value and the debt-to-valueratio if the company's growth rate is 5 percent? (Do notround intermediate calculations. Round your equity value to 2decimal places, e.g., 32.16, and round your debt-to-value answer to3 decimal places, e.g., 32.161.)
Equity value $
Debt-to-value

Answer & Explanation Solved by verified expert

4.3 Ratings (795 Votes)

a Equity value 000 Debttovalue 1000 Reasons EBIT 25800 Less Interest 25800 being 6 of 430000 Earnings available to equity holders 0 2580025800 As no cash is available to equity See Answer

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