7.Jayden and Ziad own four identical pizza shops in downtown Newark. Each shop has a debt-to-equity ratio of 35 percent and makes interest payments of $52,000 at the end of each year. The costof the firm's levered equity is 16 percent. Each store estimates that annual sales will be $1,450million. The annual cost of goods sold will be $780,000. The owners estimated annual SG&A costswill be $450,000. Note also that these cash flows are expected to remain the same forever.Estimated corporate tax is 21 percent.A) Use the flow to equity approach to determine the value of the company's equity.B) Determine the total value of J&Z Pizza shops to date.

Given Data: Debt equity35%Interest Payment 52,000Cost of levered…

Answered: Jayden and Ziad own four identical…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 15P

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