Question
Hi. Please provide solution in good form with long explanation for me to better understand. Ruth's Chris Steak House is a chain of restaurants that
Hi. Please provide solution in good form with long explanation for me to better understand.
Ruth's Chris Steak House is a chain of restaurants that began 43 years ago as a single location in New Orleans and has grown to more than 90 restaurants. RCSH went public, with an initial public offering of stock (IPO) in August 2005. A question at the time of the IPO was how to value the company, given available information. Ruth's had sales of $192.2 million in 2004, earnings of $23.3 million, and net debt less cash of $117 million. One analyst chose to use the enterprise value of comparable companies, noting that Smith and Wollensky Restaurant Group (another chain of steak restaurants) had a ratio of enterprise value to sales of 70 percent. Another restaurant chain, Morton's, had recently gone private and, in the last year as a public company, had an enterprise ratio to sales of 80 percent.
Required:
Develop an estimate of the market capitalization (market value of equity) of RCSH in August 2005 and explain your reasoning.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started