Business, 07.04.2020 15:41 jgomez042202

Edwards Construction currently has debt outstanding with a market value of $87,000 and a cost of 8 percent. The company has EBIT of $6,960 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.)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.)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.)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.)

Answers: 3

Show answers

Answers

Answer from: amandanunnery33

a-1 = $0

a-2 = 1

b-1 = $208.89

b-2 = 0.998

c-1 = $487.20

c-2 = $0.994

Explanation:

1) Interest = Debt value × Interest% = $87,000 × 8% = $6,960

Therefore the value of the company's equity is it's net income.

Net Income = EBIT - Interest

$6,960 - $6,960 = 0

Value of company's equity is 0.

2) The ratio of Debt to value of firm = Debt/ Value

Debt = $87,000

Value = debt + equity = $87,000 + $0 = $87,000

Therefore; Dept to value ratio is

$87,000 ÷ $87000 = 1

If the company's Growth Rate is 3%

1) Earnings next year EBIT = $6,960 × (1 + 3%) = $7,168.80

Since the equity value is equal to Net Income.

Net Income = EBIT - Interest

$7168.80 - $6,960 = $208.80

Therefore;

Equity Value = $208.80

2) Dept to value ratio = Dept/value

Debt = $87,000

Total Value = Debt + Equity = 87000 + 208.80 = 87208.80

Therefore; Debt to value will be

87000 ÷ 87208.80 = 0.998

If the company's Growth Rate is 7%

1) Earnings next year EBIT = $6,960 × (1 + 7%) = $7447.20

Since the equity value is equal to the Net income.

Net Income = EBIT - Interest = $7447.20 - $6,960 = $487.20

Therefore;

Equity Value = $487.20

2) The ratio of Dept to value = Dept/value

Debt = $87,000

Total Value = Debt + Equity = $87000 + $487.20 = $87487.20

Therefore; Debt to value ratio

$87000 ÷ $87487.20 = 0.994

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Answer from: Quest

those r all of them i believe

Another question on Business

Business, 22.06.2019 09:00

Consider the scenario below and let us know if you believe lauren smith's actions to be ethical. let us know why or why not. lauren smith is the controller for sports central, a chain of sporting goods stores. she has been asked to recommend a site for a new store. lauren has an uncle who owns a shopping plaza in the area of town where the new store is to be located, so she decides to contact her uncle about leasing space in his plaza. lauren also contacted several other shopping plazas and malls, but her uncle’s store turned out to be the most economical place to lease. therefore, lauren recommended locating the new store in her uncle’s shopping plaza. in making her recommendation to management, she did not disclose that her uncle owns the shopping plaza. if management decided to go with lauren's uncle's plaza, what additional information would be needed in the financial statements?

Answers: 2

Answer

Business, 22.06.2019 13:30

Jose recently died with a probate estate of $900,000. he was predeceased by his wife, guadalupe, and his daughter, lucy. he has two surviving children, pete and fred. jose was also survived by eight grandchildren, pete’s three children, naomi, daniel, nick; fred’s three children, heather, chris and steve; and lucy’s two children, david and rachel. jose’s will states the following “i leave everything to my three children. if any of my children shall predecease me then i leave their share to their heirs, per stirpes.” which of the following statements is correct? (a) under jose’s will rachel will receive $150,000. (b) under jose’s will chris will receive $150,000. (c) under jose’s will nick will receive $100,000. (d) under jose’s will pete will receive $200,000.

Answers: 1

Answer

Business, 22.06.2019 20:50

1. which one of the following would be an example of a supply-side market failure? a. a gas station is slowly leaking diesel fuel from its underground tanks, and after the leak is discovered, the business immediately cleans up the pollution at its own expense. b. a gas station is slowly leaking diesel fuel from its underground tanks, but the state uses taxpayer money to clean up the pollution rather than requiring the business to pay. c. your business wants to attract repeat customers by putting on a customer-appreciation picnic at a public park, but you decide not to because you couldn't prevent noncustomers from consuming the food and entertainment you provided. d. everyone rushes to the local retail outlet at midnight on the day of the release of a new video game console, and the store runs out before everyone is able to buy one.

Answers: 1

Answer

Business, 22.06.2019 21:30

Sunset foods relies on a highly centralized functional structure to ensure consistency in the quality and taste of its products and to drive down costs via process innovations. however, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. with the launch of its new line of breakfast foods coming up, how can sunset improve its ability to collaborate without sacrificing the benefits of its current structure

Answers: 1

Answer

You know the right answer?

Edwards Construction currently has debt outstanding with a market value of $87,000 and a cost of 8 p...

Questions