Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $35 per share. HHI has 21 million shares outstanding, as well as $64 million in debt. The ounder of HHI, Harry Harrison, made his fortune in the fast food business. He sold off part of his fast food empire, and purchased a professional hockey team. HHI's only assets are the hockey team, together with 50% of the outstanding shares of Harry's Hotdogs restaurant chain. Harry's Hotdogs (HDG) has a market capitalization of $816 million, and an enterprise value of $1.07 billion. After a little research, you find that the average asset beta of other fast food restaurant chains is 0.76. You also ind that the debt of HHI and HDG is highly rated, and so you decide to estimate the beta of both firms' debt as zero. Finally, you do a regression analysis on HHI's historical stock returns in comparison to the S&P 500, and estimate an equity beta of 1.33. Given this information, estimate the beta of HHI's investment in the hockey eam. (...) (Round to two decimal places.) HHI's asset beta is The hotdog equity beta is (Round to two decimal places.) The value of hockey team is $ million. (Round to one decimal place.) The beta of HHI's investment in the hockey team is (Round to two decimal places.)
Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $35 per share. HHI has 21 million shares outstanding, as well as $64 million in debt. The ounder of HHI, Harry Harrison, made his fortune in the fast food business. He sold off part of his fast food empire, and purchased a professional hockey team. HHI's only assets are the hockey team, together with 50% of the outstanding shares of Harry's Hotdogs restaurant chain. Harry's Hotdogs (HDG) has a market capitalization of $816 million, and an enterprise value of $1.07 billion. After a little research, you find that the average asset beta of other fast food restaurant chains is 0.76. You also ind that the debt of HHI and HDG is highly rated, and so you decide to estimate the beta of both firms' debt as zero. Finally, you do a regression analysis on HHI's historical stock returns in comparison to the S&P 500, and estimate an equity beta of 1.33. Given this information, estimate the beta of HHI's investment in the hockey eam. (...) (Round to two decimal places.) HHI's asset beta is The hotdog equity beta is (Round to two decimal places.) The value of hockey team is $ million. (Round to one decimal place.) The beta of HHI's investment in the hockey team is (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $35 per share. HHI has 21 million shares outstanding, as well as $64 million in debt. The
founder of HHI, Harry Harrison, made his fortune in the fast food business. He sold off part of his fast food empire, and purchased a professional hockey team. HHI's
only assets are the hockey team, together with 50% of the outstanding shares of Harry's Hotdogs restaurant chain. Harry's Hotdogs (HDG) has a market capitalization
of $816 million, and an enterprise value of $1.07 billion. After a little research, you find that the average asset beta of other fast food restaurant chains is 0.76. You also
find that the debt of HHI and HDG is highly rated, and so you decide to estimate the beta of both firms' debt as zero. Finally, you do a regression analysis on HHI's
historical stock returns in comparison to the S&P 500, and estimate an equity beta of 1.33. Given this information, estimate the beta of HHI's investment in the hockey
team.
(Round to two decimal places.)
The hotdog equity beta is . (Round to two decimal places.)
The value of hockey team is $ million. (Round to one decimal place.)
The beta of HHI's investment in the hockey team is
HHI's asset beta is
(Round to two decimal places.)
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