Transaction Heinz Ward & Co. (HW), a private equity firm, signed an agreement to acquire Green Landscape Services LLP (GLS) for an aggregate of $1.8 billion. The $1.8 billion acquisition includes (a) the purchase of all the companys 100 million shares at $13 per share, and (b) transaction expenses of $50 million and the balance of the $450 million to be applied to pay off the companys debt.

Use 22% tax rate.

Company Overview GLS is a provider of residential landscape services in 30 states, primarily in the Northeast and Midwest. GLS served approximately 500,000 customers last year.

Capital Raising HW is in the process of raising the necessary funds to cover the purchase price, refinance GLSs existing debt, and pay for transaction fees. The proposed structure is as follows.

Bank Debt Financing Spring Bank approved a loan based on the companys next year EBITDA. The money terms were as follows:

Amount4.0 last years EBITDAInterest6% fixedTerm5 yearsScheduled PaymentsYear 1: 5%, Year 2: 5%, Year 3: 10%, Year 4: 10%, Year 5: 70%

Equity Financing HW will invest the balance of the financing needed to acquire GLS. The expected equity return is based on a risk-free rate of 2.5%, 1.50 beta and 10% market premium.

EBITDA Assumptions Average revenue per service (ARPS): $60

Average number of services per customer per year: 10 visits

Number of total customers: 500,000

Cost of revenue as 50% of revenue

Operating expenses as 20% of revenue

DO THE FOLLOWING (use template spreadsheet via Active Learning):

a. Construct the transaction sources and uses

b. Calculate the WACC

c. Prepare the Debt Schedule