Business, 01.03.2021 21:30 TheDoges

Berkshire Hathaway Inc. is considering a business expansion to the gambling industry by acquiring a casino which generates $20 million free cash flow per year indefinitely. The risk-free rate of return is 5% and the market risk premium, over and above the risk-free rate, is 10%. Berkshire estimates that the beta of the casino is 1.2, and plans to maintain the debt-equity ratio of the casino to be one. Berkshire has recently issued bonds which pay an annual coupon of 4% and have a yield to maturity of 5%. Berkshire faces a 40% tax rate. What is the maximum price Berkshire would pay for the casino in order for the acquisition to be acceptable? a. $200.0 million
b. $150.0 million
c. $181.8 million
d. $400.0 million
e. $117.6 million

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 14:00

Bayside coatings company purchased waterproofing equipment on january 2, 20y4, for $190,000. the equipment was expected to have a useful life of four years and a residual value of $9,000. instructions: determine the amount of depreciation expense for the years ended december 31, 20y4, 20y5, 20y6, and 20y7, by (a) the straight-line method and (b) the double-declining-balance method. also determine the total depreciation expense for the four years by each method. depreciation expense year straight-line method double-declining-balance method 20y4 $ $ 20y5 20y6 20y7 total $

Answers: 3

Answer

Business, 22.06.2019 20:00

Which motion below could be made so that the chair would be called on to enforce a violated rule?

Answers: 2

Answer

Business, 22.06.2019 21:10

Your family business uses a secret recipe to produce salsa and distributes it through both smaller specialty stores and chain supermarkets. the chain supermarkets have been demanding sizable discounts, but you do not want to drop your prices to the specialty stores. true or false: the robinson-patman act limits your ability to offer discounts to the chain supermarkets while leaving the price high for the smaller stores. true false

Answers: 3

Answer

Business, 23.06.2019 01:00

While on vacation in las vegas jennifer, who is from utah, wins a progressive jackpot playing cards worth $15,875 at the casino royale. what implication does she encounter when she goes to collect her prize?

Answers: 3

Answer

You know the right answer?

Berkshire Hathaway Inc. is considering a business expansion to the gambling industry by acquiring a...

Questions