SupUp, a manufacturer of beverages, is planning to purchase Six Flags theme parks. SupUp should use the to evaluate the business of Six Flags.

Question

Quizplus · Accepted Answer

The best choice for SupUp to evaluate the business of Six Flags is to calculate the WACC (weighted average cost of capital) of Six Flags. This calculation will provide an estimate of the cost of capital that Six Flags requires to fund its operations, taking into account the relative weight of each type of capital, such as debt and equity. By comparing the WACC of Six Flags to the WACC of SupUp, SupUp can decide whether the acquisition of Six Flags is financially feasible and will add value to SupUp. The other options (average market return and WACC of SupUp) are not directly relevant to evaluating the acquisition of Six Flags.

SupUp, a Manufacturer of Beverages, Is Planning to Purchase Six