Edwards Construction currently has debt outstanding with a market value of $87,000 and a cost of 11

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Edwards Construction currently has debt outstanding with a market value of $87,000 and a cost of 11 percent. The company has EBIT of $9,570 that is expected to continue in perpetuity. Assume there are no taxes.

a. What is the value of the company’s equity? What is the debt-to-value ratio?

b. What are the equity value and debt-to-value ratio if the company’s growth rate is 3 percent?

c. What are the equity value and debt-to-value ratio if the company’s growth rate is 7 percent?

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Corporate Finance

ISBN: 9781265533199

13th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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Question Posted: Nov 22, 2023 03:37 AM

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Edwards Construction currently has debt outstanding with a market value of $87,000 and a cost of 11

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Corporate Finance

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