3 $475,000 Year 4 $550,000 After four years, the net cash flows are expected to grow at a constant rate of 3 percent per year. If we know the following information, what is the most Melissa’s Kitchen Should pay for Takeshi’s Takeout? Melissa’s Kitchen Borrowing costs 5% above the current long-term Treasury Bond rate 10-year T-Bond Rate 2/8/23 = 3.64% Beta 2.4 Debt $4 million
Melissa’s Kitchen is considering acquiring Takeshi’s Takeout Corp., a small local restaurant chain. Expected net cash flows from the acquisition for the first four years of the post-merger period are:
Year 1 $350,000
Year 2 $400,000
Year 3 $475,000
Year 4 $550,000
After four years, the net cash flows are expected to grow at a constant rate of 3 percent per year. If we know the following information, what is the most Melissa’s Kitchen Should pay for Takeshi’s Takeout?
Melissa’s Kitchen
Borrowing costs 5% above the current long-term Treasury Bond rate
10-year T-Bond Rate 2/8/23 = 3.64%
Beta 2.4
Debt $4 million
Stock 500,000 shares outstanding - $20 per share on 2/8/23
Tax Rate 21 percent
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