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Blue Scholar Learning, Incorporated (BSL)
5-year Financial Projection
($ millions)
	Actual 2010	2011	2012	2013	2014	2015
Income Statement
Net sales	1,996	2,267	2,508	2,827	3,138	3,571
Cost of sales	644	742	830	959	1,087	1,241
Gross income	1,352	1,525	1,678	1,868	2,051	2,330
Depreciation	492	785	1,061	1,301	1,009	917
Interest expense	171	178	191	175	142	110
Operating expenses	212	239	270	306	334	374
Net income before tax	477	323	156	86	566	929
Provision for taxes	186	126	61	34	221	363
Net income after tax	291	197	95	52	345	566
Balance sheet
Total current assets	1,121	1,234	1,412	1,650	1,923	2,179
Gross property and equipment	4,180	5,149	6,410	7,449	8,200	9,016
Accumulated depreciation	868	1,654	2,714	4,015	5,024	5,941
Net property and equipment	3,312	3,495	3,696	3,434	3,176	3,075
Goodwill	1,069	1,069	1,069	1,069	1,069	1,069
Total assets	5,502	5,798	6,177	6,153	6,168	6,323
Accounts payable	104	77	91	110	117	135
Short-term debt	335	482	842	814	585	393
Current portion long-term debt	41	140	165	200	223	267
Accrued expenses	86	97	120	134	174	168
Total current liabilities	566	796	1,218	1,258	1,099	963
Long-term debt	1,694	1,554	1,389	1,189	966	699
Deferred taxes	335	334	370	454	505	496
Shareholders' equity	2,907	3,104	3,200	3,252	3,598	4,165
Total liabilities and equity	5,502	5,798	6,177	6,153	6,168	6,323
Free cash flow		(7)	(130)	215	464	490

At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSLs actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemores WACC is 8.0%, BSLs WACC is 11.5%, and the average of the two companies WACCs, weighted by sales, is 8.2%. What is the firm value of BSL (in $ millions) at the beginning of 2011, assuming it is worth the book value of its assets at the end of 2015?

Multiple Choice

$628.24

$3,669.01

$4,297.80

$4,412.94

$4,984.28

$6,951.24

None of the options are correct.