Question

Milano Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt–equity ratio of 35 percent and makes interest payments of $57,000 at the end of each year. The cost of the firm’s levered equity is 15 percent. Each store estimates that annual sales will be $1.62 million; annual cost of goods sold will be $830,000; and annual general and administrative costs will be $565,000. 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. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Value of the company’s equity $

b. What is the total value of the company? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Value of the company $

Answer #1

Milano Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt–equity ratio of
35 percent and makes interest payments of $57,000 at the end of
each year. The cost of the firm’s levered equity is 15 percent.
Each store estimates that annual sales will be $1.62 million;
annual cost of goods sold will be $830,000; and annual general and
administrative costs will be $565,000. These cash flows are
expected to remain the same forever....

Milano Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt–equity ratio of
30 percent and makes interest payments of $58,000 at the end of
each year. The cost of the firm’s levered equity is 20 percent.
Each store estimates that annual sales will be $1.64 million;
annual cost of goods sold will be $840,000; and annual general and
administrative costs will be $575,000. These cash flows are
expected to remain the same forever....

Milano Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt–equity ratio of
30 percent and makes interest payments of $58,000 at the end of
each year. The cost of the firm’s levered equity is 20 percent.
Each store estimates that annual sales will be $1.64 million;
annual cost of goods sold will be $840,000; and annual general and
administrative costs will be $575,000. These cash flows are
expected to remain the same forever....

Milano Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt–equity ratio of
30 percent and makes interest payments of $59,000 at the end of
each year. The cost of the firm’s levered equity is 15 percent.
Each store estimates that annual sales will be $1.66 million;
annual cost of goods sold will be $850,000; and annual general and
administrative costs will be $585,000. These cash flows are
expected to remain the same forever....

Milano Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt–equity ratio of
35 percent and makes interest payments of $52,000 at the end of
each year. The cost of the firm’s levered equity is 20 percent.
Each store estimates that annual sales will be $1.52 million;
annual cost of goods sold will be $780,000; and annual general and
administrative costs will be $515,000. These cash flows are
expected to remain the same forever....

Pompeii 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 $58,000 at the end of
each year. The cost of the firm’s levered equity is 19 percent.
Each store estimates that annual sales will be $1.515 million;
annual cost of goods sold will be $825,000; and annual general and
administrative costs will be $485,000. These cash flows are
expected to remain the same forever....

Pompeii Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt-equity ratio of
45 percent and makes interest payments of $46,000 at the end of
each year. The cost of the firm’s levered equity is 19 percent.
Each store estimates that annual sales will be $1.335 million;
annual cost of goods sold will be $765,000; and annual general and
administrative costs will be $425,000. These cash flows are
expected to remain the same forever....

Pompeii Pizza Club
owns three identical restaurants popular for their specialty
pizzas. Each restaurant has a debt-equity ratio of 35 percent and
makes interest payments of $61,000 at the end of each year. The
cost of the firm’s levered equity is 18 percent. Each store
estimates that annual sales will be $1.56 million; annual cost of
goods sold will be $840,000; and annual general and administrative
costs will be $500,000. These cash flows are expected to remain the
same forever....

Pompeii Pizza Club owns three identical restaurants popular for
their specialty pizzas. Each restaurant has a debt-equity ratio of
35 percent and makes interest payments of $57,000 at the end of
each year. The cost of the firm’s levered equity is 18 percent.
Each store estimates that annual sales will be $1.5 million; annual
cost of goods sold will be $820,000; and annual general and
administrative costs will be $480,000. These cash flows are
expected to remain the same forever....

Tonys 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 $54,000 at the end of
each year. The cost of the firm’s levered equity is 19 percent.
Each store estimates that annual sales will be $1.455 million;
annual cost of goods sold will be $805,000; and annual general and
administrative costs will be $465,000. These cash flows are
expected to remain the same forever....

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