Problem $9-6$

A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility

of the desired size and to attain capacity operations would cost $$1,060$ million in present value terms. Alternatively, the company could

acquire an existing firm or division with the desired capacity. One such opportunity is a division of another company. The book value of

the division's assets is $$1,000$ million and its earnings before interest and tax are presently $$125$ million. Publicly traded comparable

companies are selling in a narrow range around $12$ times current earnings. These companies have book value debt$-$to$-$asset ratios

averaging $40$ percent with an average interest rate of $10$ percent.

a$.$ Using a tax rate of $38$ percent, estimate the minimum price the owner of the division should consider for its sale.

Note: Do not round intermediate calculations. Enter your answer in millions rounded to $1$ decimal place.

Minimum price

millio