39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 c. $6,045,500 d. Cannot be determined from the information provided.
39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 c. $6,045,500 d. Cannot be determined from the information provided.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The
tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is
$2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of
this business using reasonable rate return on assets.
a.
$3,995,500
b. $2,050,000
$6,045,500
Cannot be determined from the information provided.
d.
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