Problemmilano pizza club owns three identical restaurants, Ask an Expert

Finance

Problem:

Milano 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 $41,000 at the end of each year. The coast of the firm's levered equity is 19 percent. Each store estimated the annual sales will be $1.3 million: annual cost of goods sold will be $670,000: and annual general and administrative cost will be $405,000. These cash flows are expected to remain the same forever. The corporate tax rate is 40 percent.

Required:

Question 1: Use the flow to equity approach to determine the value of the company's equity.

Question 2: What is the total value of the company?

Note: Please show how you came up with the solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91174645

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