Use BSL's Actual Financial Data for 2010 and Its Projections

question 2

Multiple Choice

Use BSL's actual financial data for 2010 and its projections for 2011 to 2015 as shown above.Assume BSL is worth the book value of its assets at the end of 2015.The WACC of the acquiring firm (Macklemore) is 8.0 percent,BSL's WACC is 11.5 percent,and the average of the two companies' WACCs,weighted by sales,is 8.2 percent.What is the maximum acquisition price (in $ millions) Macklemore should pay to acquire BSL's equity?

• A) $1,702.80
• B) $2,227.80
• C) $2,342.94
• D) $2,383.94
• E) $2,603.80

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Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs.

Experiment

A scientific procedure undertaken to test a hypothesis, discover unknown effects, or demonstrate a known fact, usually under controlled conditions.

Business Practices

Established methods, protocols, or procedures followed by an organization in the conduct of its business.

Financial Information

Refers to data related to the financial performance, position, and cash flows of a business, including income statements, balance sheets, and statements of cash flows.