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

question 8

Multiple Choice

Use BSL's actual financial data for 2010 and its projections for 2011 to 2015 as shown above.Estimate BSL's value (in $ millions) at the end of 2010 assuming that at year-end 2015 the company's equity is worth 15 times earnings after tax and its debt is worth book value.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.

• A) $628.24
• B) $3,669.01
• C) $7,429.74
• D) $6,343.81
• E) $6,755.83

---

Definitions:

Lessee

The party in a lease agreement who obtains the right to use an asset in exchange for periodic lease payments.

Residual Value Guarantees

Promises made by lessees to lessors that the asset being leased will have a certain value at the end of the lease term.

Lessors

Parties that lease or rent out assets to lessees in exchange for periodic payments.

Leased Assets

Assets that are used by an entity under the terms of a lease agreement, which entails periodic payments for a specified time.