Bezique determines its acquisition offer price using a multiple of average projected operating profit for the next three years. What is the multiplier used?

• A. Three times
• B. Five times
• C. Seven times
• D. Ten times

Answer: (B)

The method tests how an offer price is built from forward profitability: you take the average operating profit projected for the next three years and multiply it by a fixed factor. In this scenario, the factor chosen is five, so the offer price equals five times that three-year average operating profit. Five is a fairly common mid-range multiplier for stable, growing businesses, balancing current performance with upside from future profits. A smaller multiplier would undervalue the company relative to its projected earnings, while a larger one would imply stronger growth or synergies than the forecast supports.