Problem 17-5 Capital Structure and Growth Edwards Construction currently has debt outstanding with a market value of
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Problem 17-5 Capital Structure and Growth
Edwards Construction currently has debt outstanding with a market value of $149,000 and a cost of 11 percent. The company has EBIT of $16,390 that is expected to continue in perpetuity. Assume there are no taxes. |
a-1. | What is the value of the company's equity? (Do not round intermediate calculations. Leave no cell blank - be certain to enter "0" wherever required.) |
a-2. | What is the debt-to-value ratio? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
b. | What are the equity value and debt-to-value ratio if the company's growth rate is 3 percent? (Do not round intermediate calculations and round your "Debt-to-value"answer to 3 decimal places, e.g., 32.161.) |
c. | What are the equity value and debt-to-value ratio if the company's growth rate is 4 percent? (Do not round intermediate calculations and round your "Debt-to-value"answer to 3 decimal places, e.g., 32.161.) |
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