Question: 4. Lolas Dance Studio currently has debt outstanding with a market value of $100,000 and a cost of 8 percent. The company has EBIT of

4. Lolas Dance Studio currently has debt outstanding with a market value of $100,000 and a cost of 8 percent. The company has EBIT of $8,000 that is expected to continue in perpetuity. Assume there are no taxes. I. What is the value of the company's equity? A. $50,000 B. $100,000 C. $1,000,000 D. $0 E. Impossible to calculate with information given. II. What is the debt-to-value ratio? A. 1.0 B. 1.9 C. 0.5 D. 1.26 E. Impossible to calculate with information given. III. What are the equity value and debt-to-value ratio if the company's growth rate is 3 percent? A. 1.000 B. 0.954 C. 0.641 D. 1.263 E. Impossible to calculate with information given. IV. What are the equity value and debt-to-value ratio if the company's growth rate is 7 percent? A. 1.000 B. 0.954 C. 0.641 D. 1.263 E. Impossible to calculate with information given.

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