Essay About Booze Wishes And Booze

Booze Holdings Case
Booze Holdings, Inc. intends to invest in two new operating divisions, a distillery company and a beer
distributorship. While Booze is publicly traded, it does not have a sense of an Equity Beta for either of the
intended divisions. However, a number of “pure play” companies do exist within each industry,
thus permitting
Booze to establish a proxy Equity Beta for each of their two new operating divisions, that is representative of just
the “operating characteristics” of each of the divisions. However, the degree of leverage for each of the firms in the
industry(s) differ from each other and from Bootleg’s target leverage for each division.
DISTILLERY INDUSTRY
Company
Equity Beta
Mkt % of Debt/Assets
Revenue as a % of the Industry
10.0%
23.0%
21.0%
Booze wishes to target a debt/asset ratio of 74% for their distillery division, representative of principally long-
term debt, the cost of the long-term debt for this division, estimated at 10.05%.
BEER DISTRIBUTORSHIP INDUSTRY
Company
Equity Beta
Mkt % of Debt/Assets
Revenue as a % of the Industry
14.0%
79.0%
69.0%