Jayden wn rour pizza shops in downtown Newa shop has a debt-to- equity ratio of 35 percent and makes interest payments of $52,000 at the end of each year. The cost of the firm's levered equity is 16 percent. Each store estimates that annual sales will be $1,450 million. The annual cost of goods sold will be $780,000. The owners estimated annual SG&A costs will be $450,000. Note also that these cash flows are expected to remain the same forever. Estimated corporate tax is 21 percent. A) Use the flow to equity approach to determine the value of the company's equity. B) Determine the total value of J&Z Pizza shops to date.

Jayden wn rour pizza shops in downtown Newa shop has a debt-to- equity ratio of 35 percent and makes interest payments of $52,000 at the end of each year. The cost of the firm's levered equity is 16 percent. Each store estimates that annual sales will be $1,450 million. The annual cost of goods sold will be $780,000. The owners estimated annual SG&A costs will be $450,000. Note also that these cash flows are expected to remain the same forever. Estimated corporate tax is 21 percent. A) Use the flow to equity approach to determine the value of the company's equity. B) Determine the total value of J&Z Pizza shops to date.

Name: None 7.Jayden and Ziad own four identical pizza shops in downtown Newa
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Description: None 7.Jayden and Ziad own four identical pizza shops in downtown Newark. Each shop has a debt-to-equity ratio of 35 percent and makes interest payments of $52,000 at the end of each year. The costof the firm's levered equity is 16 percent. Each stor

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Milano Pizza Club owns a chain of three identical restaurants for their Milan style pizza. Each store has $270,000 in debt outstanding and a debt-to-equity ratio of 30 percent. The prevailing market interest rate is 9.5 percent. An equivalent all-equity financed store would have a discount rate of 15 percent. For each store, the estimated annual sales are $1,000,000, cash costs to generate these sales are $400,000 annually, depreciation charges are $300,000 annually, and capital expenditures are $300,000 annually. Each of these values is assumed to continue in perpetuity with no growth. The corporate tax rate is 40 percent. Using the FTE approach, what is the value of Milano's Pizza Club?
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