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What is the maximum price per share

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Question - Greater Brands is considering the purchase of a regional fast casual chain Plaza Taco. Plaza Taco would be added to a growing list of Greater Brands franchisors targeted toward niche ethnic food segments in the US and in northern Mexico market areas. The current cash flow from assets for Plaza Taco is $7.1 million and is expected to grow at a rate 10% per year for the next five (5) years before leveling off to a 4% growth rate for the indefinite future. The cost of capital for Greater Brands and Plaza Taco are 11% and 9%, respectively. Plaza currently has 2.5 million shares of stock outstanding and $22 million in net debt.

What is the maximum price per share Greater Brands should pay for Plaza Taco?

a. $76.43

b. $67.63

c. $71.32

d. $62.52

e. $47.93

Reference no: EM132565121

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