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Edwards Construction currently has debt outstanding with a market value of $70,000 and a cost of 8 percent. The company had EBIT of $5,600 that is expected to continue in perpetuity. Assume there are no taxes.

a. What is the value of the company's equity? What is the debt-to-value ratio?

b. What are the equity value and debt-to-value ratio if the company's growth rate is 3 percent?

c. What are the equity value and debt-to-value ratio if the company's growth rate is 7 percent?

Basic Finance, Finance

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