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Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...

Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $230 million and a YTM of 8 percent. The company’s market capitalization is $370 million and the required return on equity is 13 percent. Joe’s currently has debt outstanding with a market value of $35 million. The EBIT for Joe’s next year is projected to be $15 million. EBIT is expected to grow at 9 percent per year for the next five years before slowing to 2 percent in perpetuity. Net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 8 percent, 14 percent, and 7 percent, respectively. Joe’s has 2.3 million shares outstanding and the tax rate for both companies is 30 percent.

b. After examining your analysis, the CFO of Happy Times is uncomfortable using the perpetual growth rate in cash flows. Instead, she feels that the terminal value should be estimated using the EV/EBITDA multiple. The appropriate EV/EBITDA multiple is 7. What is your new estimate of the maximum share price for the purchase?

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Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $150 million and a YTM of 5 percent. The company’s market capitalization is $390 million, and the required return on equity is 10 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $130 million and a YTM of 10 percent. The company’s market capitalization is $350 million, and the required return on equity is 15 percent. Joe’s currently has debt outstanding with a market value of...
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Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $130 million and a YTM of 6 percent. The company’s market capitalization is $390 million, and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $210 million and a YTM of 8 percent. The company’s market capitalization is $310 million and the required return on equity is 13 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $120 million and a YTM of 6 percent. The company’s market capitalization is $340 million, and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $130 million and a YTM of 6 percent. The company’s market capitalization is $390 million, and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $130 million and a YTM of 6 percent. The company’s market capitalization is $390 million, and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $180 million and a YTM of 9 percent. The company’s market capitalization is $420 million, and the required return on equity is 14 percent. Joe’s currently has debt outstanding with a market value of...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish...
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $220 million and a YTM of 7 percent. The company’s market capitalization is $460 million, and the required return on equity is 12 percent. Joe’s currently has debt outstanding with a market value of...
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