Asked by Dominique

Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $360 million. Since the primary asset of this business is real estate, Templeton's management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $260 million and invest only $100 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition?
Answered by chris
Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $350 million. Since the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $260 million and invest only $90 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition?
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