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.
A) Use the flow to equity approach to determine the value of the company’s equity.
B) What is the total value of the company?