Larkspur Industries has the following patents on its December 31. 2019, balance sheet. Initial Cost Date Acquired Useful Life at Date Acquired Patent Item Patent A $45,492 3/1/16 17 years 7/1/17 10 years Patent8 $17,760 PatentC $25,440 9/1/18 4years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $253,000 were incurred during the year. 2. Patent Dwas purchased on July 1 for $43,092. This patent has a useful life of 9/2years. 3. Asaresult of reduced demands for certain products protected by Patent B, a possible impairment of Patent B's value may have occurred at December 31, 2020. The controller for Larkspur estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2021 $2.0s0 2022 2.0s0 2023 2.0s0 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Compute the total carrying amount of Larkspur' patents on its December 31, 2019, balance sheet. Total carrying amount Compute the total carrying amount of Larkspur' patents on its December 31, 2020, balance sheet. Total carrying amount

Larkspur Industries has the following patents on its December 31. 2019, balance sheet. Initial Cost Date Acquired Useful Life at Date Acquired Patent Item Patent A $45,492 3/1/16 17 years 7/1/17 10 years Patent8 $17,760 PatentC $25,440 9/1/18 4years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $253,000 were incurred during the year. 2. Patent Dwas purchased on July 1 for $43,092. This patent has a useful life of 9/2years. 3. Asaresult of reduced demands for certain products protected by Patent B, a possible impairment of Patent B's value may have occurred at December 31, 2020. The controller for Larkspur estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2021 $2.0s0 2022 2.0s0 2023 2.0s0 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Compute the total carrying amount of Larkspur' patents on its December 31, 2019, balance sheet. Total carrying amount Compute the total carrying amount of Larkspur' patents on its December 31, 2020, balance sheet. Total carrying amount

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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Cfood Co. is considering acquisition of Tfood Co. Some financial information on the two companies is given below (in $ million): Cfood Co. Tfood Co. Price per share 49 13 # of shares 10 2.5 Market value 490 32.5 If Cfood acquires Tfood, the operating cost (after-tax) can be reduced by $2m, and sales (after-tax) can be increased by $3m (the synergies) per year in perpetuity. The cost of capital is 19%. Cfood is considering two alternatives for the acquistion: 1. buying all the shares of Tfood at $15.6 per share. 2. issuing 1 shares for every 3 shares of Tfood Workout on this merger deal and answer the following questions. i. What is the economic gain from the merger? ii. What will be the NPV of merger under cash offer? iii. What will be the market value of merged company (Cfood after the acquition of Tfood) under the cash offer?
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