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Question Completion Status: 10 > A Moving to the next question prevents changes to this answer Question 9 Phas analysed the annual report of 5 and other financial data presented below, to make a decision about the amount it might be willing offer to pay for equiring S has identifiable assets with a total fair value of $5,000,000 and liabilities of $2,300,000. These include buildings with a fair value 10% lower than book S's protax incomes for the years 2019 through 2020 were $350,000, and $370,000, respectively believes that an average of the earnings represents fait estimate of annual earnings for the indefinite future. However, P needs to make adjustments for the following items included in protax camins Depreciation on Buildings (each year) $300,000 Extraordinary Gain (year 2020) $80,000 The normal rate of return on net assets for the industry is 12%. Assume that requires a return of 16% on its investment, and that goodwill is determined by capitalizing excess cantings to perpetuity You are required to calculate: (a) The normal earnings for similar firms as S () The 2-year adjusted average earnings of S for 2019 and 2020 Answer: (c) The excess earnings of S Answer: (d) A reasonable price that P might offer to pay for S. Answer: e) Indicate how much of the offer price consists of goodwill

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