CMA Study Group

  Clear Displays Inc. manufactures display screens for mobile devices and is looking to expand their business through acquisition. Clear Displays has a weighted average cost of capital of 10%. They are evaluating the opportunity to acquire one of their competitors, Bright Screens Inc. Cash flows for Bright Screens are forecasted to be $110,000 in each of the next four years, and net income for Bright Screens is forecasted to be $90,000 in each of the next four years. The projected terminal value for Bright Screens at the end of that four-year period is $1,250,000. Utilizing the discounted cash flow method, the valuation for Bright Screens is expected to be a. $1,139,050. b. $1,202,450. c. $1,535,300. d. $1,598,700.