:34Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas.Each restaurant has a debt-equity ratio of 40 percent and makes interest payments of$45,000 at the end of each year. The cost of the firm's levered equity is 18 percent. Eachstore estimates that annual sales will be $1.32 million; annual cost of goods sold will be$760,000; and annual general and administrative costs will be $420,000. These cashflows are expected to remain the same forever. The corporate tax rate is 23 percent.a. Use the flow to equity approach to determine the value of the company's equity. (Donot round intermediate calculations and enter your answer in dollars, not millionsof dollars, rounded to 2 decimal places, e.g., 1,234,567.89)b. What is the total value of the company? (Do not round intermediate calculations andenter your answer in dollars, not millions of dollars, rounded to 2 decimal places,e.g., 1,234,567.89)a. Value of the company's equityb. Value of the company

a "company's value" means how much the business is worth in financial and non-financial terms. It…

Answered: Pompeii Pizza Club owns three identical…

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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