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Best's Foods is seeking to acquire the Heinz Baking Company, whose book value is $34 million....

Best's Foods is seeking to acquire the Heinz Baking Company, whose book value is $34 million. A comparable bakery was recently acquired for $300 million, 20% more than the book value of the firm. What was the book value of the recently acquired bakery? How much should Best's Foods expect to have to pay for the Heinz Baking Company?

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Answer #1

Book value of recently sold bakery :

1.2 × Book Value = $300 million

Book value =$300 /1.2 = $250 million

Hence Best foods should be willing to pay

Value = 1.2 × $34 million = $40.8 million.

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