What are equity value and debt-to-value ratio

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Reference no: EM132001229

Edwards Construction currently has debt outstanding with a market value of $80,000 and a cost of 8 percent. The company has EBIT of $6,400 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.)

Value of equity

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.)

Debt-to-value ratio

b. What are the equity value and debt-to-value ratio if the company's growth rate is 3.5 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.)

Equity value $

Debt-to-value

c. What are the equity value and debt-to-value ratio if the company's growth rate is 5.5 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.)

Equity value $

Debt-to-value

Reference no: EM132001229

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