Recreational marijuana sales are at all time highs (sorry) and the California budget is looking better! The Governor has decided NOT to sell CSUSM (also, the bid prices were too low). Instead, Californians have decided to value education more. State Planners have now come to him with a proposal to buy some school up north called Pepperdine University and make it a new CSU-Pepperdine.

[1] Looking only at cash flow from tuition and keep it running as a school, what would be a very rough reasonable price to pay for Pepperdine? Explain WHY and HOW (in Finance 302 terms, other non-finance 302 discussion will be ignored) you got at that price.

[2] The Guv wants to get an IRR of at least 10%. Then, what price can he very roughly offer? Explain

[3] WHY and HOW you got to that price.

[4] What assumption did you make about interest rate and why?

[5] What does it tell you about the deal NPV?

[6] The buyer would be the CSU system, what are your thoughts on the WACC for the Cal State University (CSU) system? How and why it should be, and if there is a better alternative route the Governor can use to finance the purchase bid?

[7] Bonus: Any other Finance 302 tools and techniques or considerations to keep in mind?