Our company, Aztec Industries, is going to buy another company, British Pharma Inc. We want to value the shares of British Pharma Inc., and, therefore, we will use three alternatives of the debt/equity structure so as to obtain WACC:

(1) present structure of Aztec Industries;

(2) present structure of British Pharma Inc., and

(3) structure used by Aztec Industries to finance the acquisition of British Pharma Inc.s shares.

We will value British Pharma Inc. by applying these three alternatives and then take as a reference the average of these three results.

Is this the correct approach? Explain your answer fully.