Estimate the beta of investment in the hockey team

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Reference no: EM131907282

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $38 per share. HHI has 21 million shares outstanding, as well as $61 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 $868 million, and an enterprise value of $1.09 billion. After a little research, you find that the average asset beta of other fast food restaurant chains is 0.78. 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 1.34. Given this information, estimate the beta of HHI's investment in the hockey team.

1. HHI's Asset Beta is: ______ (Round to 2 decimal places)

2. The hotdog equity beta is: ______ (Round to 2 decimal places)

3. The value of hockey team is $_____ (Round to 2 decimal places)

4. The beta of HHI's investment in the hockey team is _____ (Round to 2 decimal places)

Reference no: EM131907282

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