As a business valuation expert, you have been allotted with the project to estimate the cost of equity for Alton Holdings. Alton Holdings operates in three different business sectors - Entertainment, Hotels, and Travel Services. The table beneath gives the information you collected both for the firm and for other comparable firms in each business sector. i. ii. iii. Business Sector Entertainment Hotel Travel Alton Holdings Sales Revenues €500 million €500 million €950 million Unlevered beta 0.95 1.15 Comparable Firms 1.45 Value/Sales Revenues 2.5 3.5 1.5 Estimate the (bottom-up) unlevered beta for Alton Holdings. Assume that Alton Holdings has no market-traded debt but €1.3 billion in book debt, an interest expense of €75 million per year, maturity 5 years and corporate bonds with the same credit rating as Alton Holdings yield 7.5%. Estimate the market value of debt of Alton Holdings. Assume next that Alton Holdings has 100 million shares trading at €12 per share. The tax rate is 40%. Estimate the (bottom up) levered beta for the Alton Holdings.

As a business valuation expert, you have been allotted with the project to estimate the cost of equity for Alton Holdings. Alton Holdings operates in three different business sectors - Entertainment, Hotels, and Travel Services. The table beneath gives the information you collected both for the firm and for other comparable firms in each business sector. i. ii. iii. Business Sector Entertainment Hotel Travel Alton Holdings Sales Revenues €500 million €500 million €950 million Unlevered beta 0.95 1.15 Comparable Firms 1.45 Value/Sales Revenues 2.5 3.5 1.5 Estimate the (bottom-up) unlevered beta for Alton Holdings. Assume that Alton Holdings has no market-traded debt but €1.3 billion in book debt, an interest expense of €75 million per year, maturity 5 years and corporate bonds with the same credit rating as Alton Holdings yield 7.5%. Estimate the market value of debt of Alton Holdings. Assume next that Alton Holdings has 100 million shares trading at €12 per share. The tax rate is 40%. Estimate the (bottom up) levered beta for the Alton Holdings.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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