Edwards Construction currently has debt outstanding with a market value of $95,000 and a cost of 9

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Edwards Construction currently has debt outstanding with a market value of $95,000 and a cost of 9 percent. The company has EBIT of $8,550 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-tovalue 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: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Question Posted: Dec 06, 2019 12:58 PM

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Edwards Construction currently has debt outstanding with a market value of $95,000 and a cost of 9

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a The interest payments each year will be Interest payment 0995000 Interest payment 8550 This amount ...View the full answer

Corporate Finance

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