1.An early-stage company (Venture) has an equity book value of $100 million and assume a...
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1.An early-stage company (Venture) has an equity book value of $100 million and assume a bookbond-to-stock ratio of 45%. The cost-of-bond, rB, is 8% and, if Venture were all stock financed, investors would expect a rate of return of 18%. Venture has annual sales of $150 million, cost of goods sold of $40 million, and annual administrative costs of $50 million.Ventures capital structure, sales, and costs continue into perpetuity, and the corporate tax rate is 15%. Assume that all cash flows are at year end, with the first occurring one year from now. a)What is the value of Ventures stock (or equity)?
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