Tesla, Inc., wants to expand its infrastucture into the Midwest. In order to establish an immediate an immediate presence in the area, the company is considering the aquisition of the privately held Rob Allen's Used Car Dealership. Tesla currently has debt outstanding with a market value of $325 million and a yield to maturity of 7.25%. The company's market capitalization is $450 million and the required return on equity is 10.25%. Rob's currently has debt outstanding with a market value of $73.5 million.The EBIT for Rob's next year is projected to be $20.35 million. EBIT is expected to grow at 9.75% per year for the next six years before slowing to 4.50% in perpetuity. Net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 8.5%, 15.20%, and 6.85% respectively. Rob's has 575,000 shares outstanding and the tax rate for both companies is 21%. Based on these estimates, what is the maximum share price that Tesla should be willing to pay for Rob Allen's Used Car Dealership?
Tesla, Inc., wants to expand its infrastucture into the Midwest. In order to establish an immediate an immediate presence in the area, the company is considering the aquisition of the privately held Rob Allen's Used Car Dealership. Tesla currently has debt outstanding with a market value of $325 million and a yield to maturity of 7.25%. The company's market capitalization is $450 million and the required
Based on these estimates, what is the maximum share price that Tesla should be willing to pay for Rob Allen's Used Car Dealership?
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