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2. You have been asked to assess the valuation of a chain of privately owned video stores for sale to Blockbuster, a publicly traded firm.
2. You have been asked to assess the valuation of a chain of privately owned video stores for sale to Blockbuster, a publicly traded firm. The analyst, who valued the video stores at $ 65 million, valued the firm using the following parameters: The cost of equity used was 25% to reflect the high risk of a private business, the after-tax cost of debt was 5%, and the book value debt to capital ratio of 50% was used to compute the cost of capital
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