Edwards Construction currently has debt outstanding with a market value of $116,000and a cost of 12 percent. The company has EBIT of $13,920 that is expected to continuein 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- What is the debt-to-value ratio? (Do not round intermediate calculations and round2. 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 5percent? (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 8percent? (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 equitya-2. Debt-to-valueratiob. Equity valueb. Debt-to-valuec. Equity valuec. Debt-to-value$$019,943 X0.921 X27,840 X0.810

Market value of debt outstanding$116,000.00Cost of debt12%EBIT$13,920.00

Answered: Edwards Construction currently has debt…

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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8 Company A invests in a $55 million bond. It was purchased at par and is accounted for using amortized cost. At year-end Company A believes that there is a 5% the company will not collect 50% of the face value over its life. Company A uses the expected loss impairment model. Discuss any financial reporting issues (should we recognize them or not recognize them) and provide any recommendations on how to handle this situation.
! Required information [The following information applies to the questions displayed below.] Thrillville has $39.3 million in bonds payable. One of the contractual agreements in the bond is that the debt to equity ratio cannot exceed 2.0. Thrillville's total assets are $79.3 million, and its liabilities other than the bonds payable are $9.3 million. The company is considering some additional financing through leasing. Required: 1. Calculate total stockholders' equity using the balance sheet equation. (Enter your answer in millions rounded to 1 decimal place (i.e., $5,500,000 should be entered as 5.5).) Stockholders' Equity minus
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An amortization of a debt is in a form of a gradient series of P5,000 on the first year, P4,500 on the second year, P4,000 on the third year, P3,500 on the fourth year. Determine the future amount of the amortization if interest is 0.06. Note: Interest is already shown in decimal form. Do not round in between solution. Final answer round to the nearest WHOLE NUMBER
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Maddux Corporation has an EBIT of $835,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 16 percent and the corporate tax rate is 21 percent. The company also has a perpetual bond issue outstanding with a market value of $2.1 million. What is the value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) Value of the company
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