Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
Bartleby Related Questions Icon

Related questions

Question
Edwards Construction currently has debt outstanding with a market value of $104,000
and a cost of 12 percent. The company has EBIT of $12,480 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 "O" wherever required.)
a- What is the debt-to-value ratio? (Do not round intermediate calculations and round
2. 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 6
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 10
percent? (Do not round intermediate calculations and round your "Debt-to-
value" answer to 3 decimal places, e.g., 32.161.)
Answer is complete but not entirely correct.
a-1. Value of equity
a-2. Debt-to-value
ratio
0
1
b. Equity value
116,480
b. Debt-to-value
c. Equity value
c. Debt-to-value
0.471
$
11,400 x
0.151
expand button
Transcribed Image Text:Edwards Construction currently has debt outstanding with a market value of $104,000 and a cost of 12 percent. The company has EBIT of $12,480 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 "O" wherever required.) a- What is the debt-to-value ratio? (Do not round intermediate calculations and round 2. 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 6 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 10 percent? (Do not round intermediate calculations and round your "Debt-to- value" answer to 3 decimal places, e.g., 32.161.) Answer is complete but not entirely correct. a-1. Value of equity a-2. Debt-to-value ratio 0 1 b. Equity value 116,480 b. Debt-to-value c. Equity value c. Debt-to-value 0.471 $ 11,400 x 0.151
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education