Capital Structure and Growth Edwards Construction currently has debt outstanding with a market value of $170,000 and a cost of 8 percent. The company has an EBIT of $13,600 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 is the equity value and debt to value ratio if the company's growth rate is 5 percent?
c. What is the equity value and debt to value ratio if the company's growth rate is 7 percent?