Johnson's management believes that the most reliable way to value a potential target firm is by averaging multiple valuation methods, since all methods have their shortcomings. Consequently, Johnson's Chief Financial Otfcer (CFO) estimates that the value of Jameson Limited, a potential takeover target could range, before an acquisition premium is added, from a high of $650 million using discounted cash flow analysits to a low of $500 million using the comparable companies' relative valuation method. A valuation based on arecent comparable transaction is $672 million. The CFO anticipates that Jameson Limited s management and shareholders would be willing to sell for a 20 percent acquisition premium based on the premium paid for the recent comparable transaction. The CEO asks the CFO to provide a single estimate of the value of Jameson Limited based on the three estimates. In calculating a weighted average of the three estimates, the CFO gives a value of 0.6 to the recent transactions method, 0.3 to the DC.F estimate, and 0.1 to the comparable companies' estimate. Required: 1. Calculate the welghted average value of Jameson Limited. [7 marks] 2. Briefly explain why the CFO allocated a 60% weight to the "recent transactions method', and only 10% to the "comparable method? [3 marks]