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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