Gmail >docs.google.com aP Company is trying to decidewhether to acquire S Co., P Co.expects that S will earn approximately$200,000 per year in net income overthe next five years. This income ishigher than the 14% annual return onassets considered to be the industry"norm."Read the above case and choose thebest answer of the following:If the fair value of Hager Inc. assetsequal to $1,000,000. What is theestimation of goodwill if P Co. is willingto pay for excess earnings for anexpected life of 4 years? *$250,000$240,000$260,000None of the answers

Goodwill is recorded ad an asset when there is the purchase of another business. Often the purchase…

Answered: P Company is try whother to acau bether

Business

Accounting

P Company is try whother to acau bether

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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A company is considering two (2) capital expenditure proposals, X and Y. Both options will generate the new line of product that the company will produce. Both are expected to operate for four (4) years. Only one (1) proposal will be accepted. The following information is provided to you: X Y Acquisition cost P46,000.00 P46,000.00 Life 4 4 Profits after depreciation Year 1 P6,500.00 P4,500.00 Year 2 3,500.00 2,500.00 Year 3 13,500.00 4,500.00 Year 4 -1,500.00 14,500.00 Scrap value 4,000.00 4,000.00 Depreciation is charged on a straight-line basis. Required: Calculate the Payback Period for both proposals. Which proposal fared better? Calculate the ARR for both Which proposal fared better? Which appraisal method will you use to decide on this product?
A company is considering two (2) capital expenditure proposals, X and Y. Both options will generate the new line of product that the company will produce. Both are expected to operate for four (4) years. Only one (1) proposal will be accepted. The following information is provided to you: Y Acquisition cost P46,000.00 P46,000.00 Life 4 4 Profits after depreciation Year 1 P6,500.00 P4,500.00 Year 2 3,500.00 2,500.00 Year 3 13,500.00 4,500.00 Year 4 -1,500.00 14,500.00 Scrap value 4,000.00 4,000.00 Depreciation is charged on a straight-line basis. Required: 1. Calculate the Payback Period for both proposals. Which proposal fared better? 2. Calculate the ARR for both proposals. Which proposal fared better? 3. Which appraisal method will you use to decide on this product? Explain.
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XYZ Company has an opportunity to purchase and asset that will cost the company $60,000. The asset is expected to add $12,000 per year to the company’s net income. Assuming the asset has a 5-year useful life and a zero salvage value, the unadjusted rate of return will be?
Hunt Company is considering purchasing a competing company in order to expand its marketshare. Estimates of the excess of the value of the individual assets, less liabilities to be assumed,range from $50,000 to $60,000, depending on the manner in which that excess is calculated. Huntbelieves it can purchase the competitor for a direct cash outlay of $700,000, which is only $25,000more than the value of the individual assets less the liabilities that Hunt will assume. AssumingHunt makes the purchase for $700,000, at what amount should goodwill be recorded? Brieflyexplain your answer.
Maple Media is considering a proposal to enter a new line of business. In reviewing the proposal, the company's CFO is considering the following facts: 1. The new business will require the company to purchase additional fixed assets that will cost $600,000 at t=0. For tax and accounting purposes, these costs will be depreciated on a straight-line basis over three years. (Annual depreciation will be $200,000 per year at t=1,2,and 3) 2. At the end of three years, the company will get out of the business and will sell the fixed assets at a salvage value of $100,000. 3. The project will require a $50,000 increase in net operating working capital at t=0, which will be recovered at t=3. 4. The Company's marginal tax rate is 35 percent. 5. The new business is expected to generate $2 million in sales each year (at t=1,2, and 3). 6. The operating costs excluding depreciation are expected to be $1.4 million per year. 7. The projects's cost of capital is 12 percent. What is the projects Internal…
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