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After-tax operating income on revenues

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Reference no: EM133111810

As a young investment banker you are hired to advise a buyer of Baja restaurant, which plans on going public soon. You are provided with the following information on the firm:

  • Baja will generate $ 5 million in after-tax operating income on revenues of $ 100 million next year. 
  •  There are some inefficiencies in the way the restaurant is operated. The owner has been very transparent with financial reporting. 
  • If management of the restaurant is improve it could generate $ 6.5 million in after-tax operating income next year on the same revenues, though expected growth is unlikely to be affected.
  •  The unlevered beta of publicly traded restaurants is 1.25, 
  • The Treasury bond rate is 5% and the market risk premium is 4%.
  •  The firm will be all equity financed. 
  • The owner is planning to issue 2 million Estimate the value per share 

Estimate the enterprise value of the firm with existing management and new management for a public offering. Show all work and formulas.

Reference no: EM133111810

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