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

SupUp should use the WACC (Weighted Average Cost of Capital) of Six Flags to evaluate the business as it takes into account the cost of all of Six Flags' capital, including equity and debt. This will help SupUp determine the minimum return that Six Flags needs to generate in order to cover its cost of capital. Using SupUp's own WACC would not be appropriate as it would not accurately reflect the cost of Six Flags' capital. Average market return is not relevant to evaluating the business of Six Flags.

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