- Milano Pizza Club owns a chain of three identical restaurants
for their Milan style pizza. Each store has a debt-to-equity ratio
of 30 percent and makes interest payments of $25,650 at the end of
each year. An equivalent all-equity financed store would have a
discount rate of 15 percent and the cost of debt is 9.5%. For each
store, the estimated annual sales are $1,000,000, costs of goods
sold are $400,000, and overhead costs are $300,000. Each of these
cash flow streams is assumed to be a perpetuity. The corporate tax
rate is 40 percent. Using the FTE approach, what is the value of
Milano’s Pizza Club’s equity?
Answer is $3,088,367.73
^Please show work how to get this^