Use BSL's actual financial data for 2010 and its projections for 2011 to 2015 as shown above.Assume 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.What is the maximum acquisition price (in $ millions)Macklemore should pay to acquire BSL's equity at the end of 2010?

Question

Quizplus · Accepted Answer

The maximum acquisition price Macklemore should pay to acquire BSL's equity at the end of 2010 is calculated using the discounted cash flow (DCF) method, considering the projected earnings, the weighted average cost of capital (WACC), and the terminal value at the end of 2015. The correct answer, $4,723.81 million, reflects the present value of BSL's future cash flows and terminal value, discounted at the appropriate WACC.

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