You have been asked to value "The Skyfall," a privately owned restaurant that generated $ 150,000 in after-tax operating income on $ 1 million of revenues last year and is expecting revenues to grow 10% a year for the next 5 years. However, the chef, who is also the owner, did not pay himself a salary last year and you estimate that the new owner would have to pay a replacement chef $100,000 each year (in after-tax dollars). You have run a regression of publicly traded restaurants to get the following:

EV/Sales = 1.0 + 10*(After-tax Operating Margin) + 5*(Expected Growth in next 5 years) - 0.5*(Beta)

(Margins and growth are entered in decimals; a 10% margin is input as 0.10)

If the average beta across publicly traded restaurants is 1.2, estimate the enterprise value for the privately owned restaurant in a private transaction. Assuming that the buyer is completely diversified, what adjustments would you need to make to the estimated value?