Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a...

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Finance

Pompeii Pizza Club owns three identical restaurants popular fortheir specialty pizzas. Each restaurant has a debt-equity ratio of45 percent and makes interest payments of $59,000 at the end ofeach year. The cost of the firm’s levered equity is 16 percent.Each store estimates that annual sales will be $1.53 million;annual cost of goods sold will be $830,000; and annual general andadministrative costs will be $490,000. These cash flows areexpected to remain the same forever. The corporate tax rate is 22percent.
a. Use the flow to equity approach to determine 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)
b. What is the total value of the company? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

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Pompeii Pizza Club owns three identical restaurants popular fortheir specialty pizzas. Each restaurant has a debt-equity ratio of45 percent and makes interest payments of $59,000 at the end ofeach year. The cost of the firm’s levered equity is 16 percent.Each store estimates that annual sales will be $1.53 million;annual cost of goods sold will be $830,000; and annual general andadministrative costs will be $490,000. These cash flows areexpected to remain the same forever. The corporate tax rate is 22percent.a. Use the flow to equity approach to determine 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)b. What is the total value of the company? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)