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Edwards Construction currently has debt outstanding with a market value of $96,000 and a cost of 11 percent. The company has EBIT of $10,560 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 "0" wherever required.) Value of equity a-2. What is the debt-to-value ratio? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Debt-to-value ratio b. What are the equity value and debt-to-value ratio if the company's growth rate is 3 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.) Equity value $ Debt-to-value c. What are the equity value and debt-to-value ratio if the company's growth rate is 7 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.) Equity value $ Debt-to-value
Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 36% of the company’s present value, and you believe that at this capital structure the company’s d..
Assume today is December 31, 2013. Barrington Industries expects that its 2014 after-tax operating income [EBIT(1 – T)] will be $440 million and its 2014 depreciation expense will be $70 million. The firm has no preferred stock on its balance sheet a..
Your car dealer is willing to lease you a new car for $319 a month for 72 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, what is the current value of th..
In a period of heightened price volatility, the beta of the market will: What is a buyback? What is a bank?
You work for a gold mine. The mine recently announced new production of 100,000 ounces a year for 5 years. How would you hedge the production?
A firm has $ 3 million market value and it sells preferred stock with a par value of $100. If the coupon rate on the preferred stock is 9% and the preferred stock trades at $85, what is the cost of preferred stock financing? A firm reports that in a ..
You manufacture wine goblets. In mid-June, you receive and order for 10,000 goblets from Europe. Payment of €400,000 is due in mid-December. You expect the €uro to rise from its present rate of $1=€1.5, to a rate of $1=€1.4 by December. You can borro..
A(n) seven-year bond has a yield of 8% and a duration of 7.212 years. If the bond's yield increases by 40 basis points, what is the percentage change in the bond's price?
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type..
The Cookie Shoppe expects sales of $750,000 next year. The after-tax profit margin is 6% percent and the firm has a 25% dividend payout ratio. What is the projected increase in retained earnings?
A common stock is held for four years, during which time it receives an annual dividend of $7. The stock was sold for $100 and generated an average return of 9%. What price was paid for the stock?
What factors may contribute to the decline in usefulness of operating assets? Should the choice of depreciation method be related to these factors? Must a company choose just one method of depreciation for all assets? Explain
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