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Entity earnings Industry earnings in pesos P 700,000 Year in percent 2012 11 2013 800,000 11 2014 800,000 12 2015 900,000 12 2016 1,000,000 13 2017 1,100,000 14 2018 1,200,000 15 2019 1,800,000 19

Entity earnings Industry earnings in pesos P 700,000 Year in percent 2012 11 2013 800,000 11 2014 800,000 12 2015 900,000 12 2016 1,000,000 13 2017 1,100,000 14 2018 1,200,000 15 2019 1,800,000 19

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Corporation is planning to purchase another entity. ABC gathered the following information based on the publicly available financial reports:
 
On the target acquisition date, the fair value of the net assets of the entity is expected to be at P6,000,000. ABC deems a 15%-rate appropriate for capitalization purposes. If ABC is willing to value the goodwill using the capitalization of average earnings method based on the past five years, how much should its offer price be on the entity? 
Entity earnings Industry earnings in pesos P 700,000 Year in percent 2012 11 2013 800,000 11 2014 800,000 12 2015 900,000 12 2016 1,000,000 13 2017 1,100,000 14 2018 1,200,000 15 2019 1,800,000 19
Transcribed Image Text:Entity earnings Industry earnings in pesos P 700,000 Year in percent 2012 11 2013 800,000 11 2014 800,000 12 2015 900,000 12 2016 1,000,000 13 2017 1,100,000 14 2018 1,200,000 15 2019 1,800,000 19
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