Using the information provided below, estimate the appropriate WACC for use in an NPV project acceptance analysis for the VitaMed acquisition. When you have completed your work, you must enter the values for the main components of your WACC calculation on the Final Assignment Answer Input Sheet.

Quiz Instructions

Please use the questions below to input your calculations for the WACC for the Final Individual Assignment.

Question 1

The value for the unlevered beta of New You, Inc. is

Question 2

The value for the unlevered beta of Innovative Health, Inc is

Question 3

The value for the unlevered beta of Better Living, Inc is

Question 4 1

I have chosen the following companies to use as comparables in estimating the WACC for VitaMed (multiple choice):

United Health Products

New You, Inc

Innovative Health

Better Living, Inc.

Question 5

What is the value of the beta that you used in the WACC equation? (Numerical Answer)

Question 6

What number did you use for D/V in the WACC equation?

Question 7

What number did you use for E/V in the WACC equation?

Question 8

What rate did you choose for the risk-free rate?

Question 9

What number did you use for the market premium?

Question 10

What tax rate did you use in calculating the WACC?

Question 11

What cost of debt did do you use in calculating the WACC for VitaMed?

Question 12

What was your estimate for the WACC for VitaMed?

Question 13

If you learned that United Health Products intended to finance the acquisition of VitaMed with 75% debt, how would your answers to any of the questions above change? (A general verbal reply is sufficient.)

Exhibit 1- Market Value Target Leverage Ratios ebt as a percentage of value Average Cost of De bt United Health Products New You, Inc Innovative Health Better Livihg, Inc. 30% 3090 40% 2590 7% 10% 12% 890 Exhibit 2 - Company Data Current Average Beta Leverage Return Market Revenues (in Effective tax rate SBillions) Ratio United Health Products 15% | 0.88 50% 12 .36 ew You, Inc 13% 1.2 20% .30 novative Health 1796 | 1.07 60% .30 etter Living. Inc. 14% 15% 0.5 .30 Exhibit 3 Government Bond Rates & Market Spread Data Spread Between S&P 500 Composite Retums & Government Bond Returns US Govenment Bond Rates 1-year 10-year 30-year 7.00% 8.05% 8.95 16% 12.50% Short Term (3-year average) ong Term (12-year average)