Atlas Corp is contemplating acquiring Miya Inc. Relevant information follows: ● Miya's average annual earnings in the past 5 years were P540,000 ● Miya's net assets as the current year-end have a fair value of P5,000,000 ● The industry average rate of return on equity is 10% ● The probable duration of Miya's “excess earnings" is 5 years. If goodwill is measured by capitalizing the average excess earnings at 20%. How much is the goodwill?
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Atlas Corp is contemplating acquiring Miya Inc. Relevant information follows:
● Miya's average annual earnings in the past 5 years were P540,000
● Miya's net assets as the current year-end have a fair value of P5,000,000
● The industry average
● The probable duration of Miya's “excess earnings" is 5 years.
If
much is the goodwill?
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- An entity is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of the entity at current year end was P10,000,000. 1. What is the purchase price if goodwill is measured by capitalizing excess earnings at 25%?2. What is the purchase price if goodwill is measured by capitalizing average annual earnings at 25%?Please answer it in next 45mins,it would be a great help. ParCorp spent $720K to acquire all of ChiCorp's stock on January 1, 20X2, when ChiCorp's retained earnings was $300K. Difference between the acquisition price and ChiCorp's underlying book value was attributed to buildings with a remaining economic life of 10 years from the date of acquisition. On December 31, 20X3, ParCorp reported Investment in sub of $756K, while ChiCorp reported common stock of $300K, retained earnings of $360K. Prepare the elimination entry in entry format for consolidation on Dec 31, 20X3.ABC Holdings Corporation will be acquiring 100% ownership of XYZ Corporation. The latter currently has annual returns of P1,180,000, a required rate of return of 16%, and a remaining business life of 3 years. If ABC Holding Corporation acquires XYZ, this life will be extended to 10 years but its operating risk will also increase. The required rate of return on XYZ would become 17%. What is the value of control that ABC sees in acquiring XY
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- Financial Corporation wants to acquire Great Western Inc. Financial has estimated the enterprise value of Great Western at $104 million. The market value of Great Western’s long-term debt is $15 million, and cash balances in excess of the firm’s normal working capital requirements are $3 million. Financial estimates the present value of certain licenses that Great Western is not currently using to be $4 million. Great Western is the defendant in several outstanding lawsuits. Financial Corporation’s legal department estimates the potential future cost of this litigation to be $3 million, with an estimated present value of $2.5 million. Great Western has 2 million common shares outstanding. What is the value of Great Western per common share?At the beginning of the year 1, Down Under Company raises $60 million of equity and uses the proceeds to buy a fixed asset. Operating profits before depreciation (all received in cash) and dividends for the company are expected to be $40 million in year 1, $50 million in year 2, and $60 million in year 3, ath which point the company terminates. The firms pays no taxes. Assuming stright line depreciation to zero (of 20 million per year) the firm's profits thus equal $20 in year 1, $30 million in year 2 and $40 milion in year 3. If the cost of equity is 6%, the value of the firms equity is: Use the Discounted Dividend Valuation MethodDuring the past several years the annual net income of Avery Company has averaged $540,000.At the present time the company is being offered for sale. Its accounting records show the bookvalue of net assets (total assets minus all liabilities) to be $2,800,000. The fair value of Avery’s netidentifiable assets, however, is $3,000,000.An investor negotiating to buy the company offers to pay an amount equal to the fair value forthe net identifiable assets and to assume all liabilities. In addition, the investor is willing to pay forgoodwill an amount equal to the above-average earnings for five years.On the basis of this agreement, what price should the investor offer? A normal return on the fairvalue of net assets in this industry is 15 percent.
- Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two companies as separate entities are $42 million and $21 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $610,000 per year in perpetuity. Velcro Saddles considers offering Skiers’ shareholders a 50% holding in Velcro Saddles. The opportunity cost of capital is 10%. a. What is the value of the stock in the merged company held by the original Skiers’ shareholders? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the cost of the stock alternative? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. What is the merger’s NPV under the stock offer? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions…At the beginning of the year 1, Down Under Company raises $60 million of equity and uses the proceeds to buy a fixed asset. Operating profits before depreciation (all received in cash) and dividends for the company are expected to be $40 million in year 1, $50 million in year 2, and $60 million in year 3, ath which point the company terminates. The firsms pays no taxes. Assuming stright line depreciation to zero (of 20 million per year) the firm's profits thus equal $20 in year 1, $30 million in year 2 and $40 milion in year 3. If the cost of equity is 6%, the value of the firms equity is: Use the Abnormal Earnings Valuation Method Hint: Book Value per year is affected by the 20 million every yearFrappe Company is acquiring Frappuccino Corporation on January 1, 2020. The cumulative earnings of Frappuccino from 2015 to 2019 amounted to P7,200,000. On January 1, 2020, the assets and liabilities of Frappuccino at appraised values are P10,350,000 and P6,650,000, respectively. The normal return in Frappuccino 's industry is 20%. Goodwill is computed by capitalizing at 25% average earnings in excess of normal return based on appraised value of net assets. What is the amount paid by Frappe in the acquisition of Frappuccino Corporation?