Drayton McLane sold the Astros a few years back for about $645 Million. (Youcan assume he sold it at the end of 2011). He originally purchased the team at the end of1992 for $117 million. Back in 1992 the S&P 500 stock market index was at about $30 and itwas about $120 at the end of 2011 (adjusted for splits and dividends). You can assume theyield on treasuries was about 4% over the period and the expected market risk premium was5.5%. Also, forget about any other cash flows from ownership rights, franchise fees,subsidies for the stadium etc. Assume the whole deal was 100% equity. Based on thepurchase and sale price, was it a good deal?

Answer rating: 100% (QA)

To determine if selling the Astros was a good deal for Drayton McLane we need to compare the return on investment ROI he received from the sale with t... View the full answer