Carla Vista Homes Company is considering the acquisition of Metlock, Inc. early in 2025. To assess the amount, it might be willing to pay Carla Vista Homes makes the following computations and assumptions A Metlock, Inc. has identifiable assets with a total fair value of $15,016,000 and liabilities of $8,817,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book valun, and land with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Metlock, Inc. Merinck, Inc's pretax incomes for the years 2022 through 2024 were $1.202.200, $1,500,300, and $950.100 respectively Carla Vista Homes helieves that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments to the following items included in pretaceamings Depreciation on buildings (each year 963100 Depreciation on equipment (each year) 54,500 Extraordinary loss fynar 2024) 301-800 Sales commissions teach year) 251.400 The normal rate of return on net assets for the industry is 15% Assume further that Carla Vista Homes feels that it must eare a 25 return on its investment and that goodwill is determined by capitalizing excess eamings. Based on these assumptions, calculate a reasonable offering price for Metlock, Inc. Indicate how much of the price consists of goodwill. Ignore tax effects. (Round present value factor calculations to 5 decimal places, ea 125124 and final answers to O decimal places ea. 58.971) Goodwill Offering price 406 Assume that Carla Vista Homes feels that it must eama 156 return on vestment, but that average excess earnings are to be So for Metlock, inc indicate how For these xsumptions effects (Round present value factor calculations to 5 decimal places, eg 1.25124 and final answers to decimal places es, 58.9713
Carla Vista Homes Company is considering the acquisition of Metlock, Inc. early in 2025. To assess the amount, it might be willing to pay Carla Vista Homes makes the following computations and assumptions A Metlock, Inc. has identifiable assets with a total fair value of $15,016,000 and liabilities of $8,817,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book valun, and land with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Metlock, Inc. Merinck, Inc's pretax incomes for the years 2022 through 2024 were $1.202.200, $1,500,300, and $950.100 respectively Carla Vista Homes helieves that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments to the following items included in pretaceamings Depreciation on buildings (each year 963100 Depreciation on equipment (each year) 54,500 Extraordinary loss fynar 2024) 301-800 Sales commissions teach year) 251.400 The normal rate of return on net assets for the industry is 15% Assume further that Carla Vista Homes feels that it must eare a 25 return on its investment and that goodwill is determined by capitalizing excess eamings. Based on these assumptions, calculate a reasonable offering price for Metlock, Inc. Indicate how much of the price consists of goodwill. Ignore tax effects. (Round present value factor calculations to 5 decimal places, ea 125124 and final answers to O decimal places ea. 58.971) Goodwill Offering price 406 Assume that Carla Vista Homes feels that it must eama 156 return on vestment, but that average excess earnings are to be So for Metlock, inc indicate how For these xsumptions effects (Round present value factor calculations to 5 decimal places, eg 1.25124 and final answers to decimal places es, 58.9713
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Carla Vista Homes Company is considering the acquisition of Metlock, Inc. early in 2025. To assess the amount, it might be willing to
pay Carla Vista Homes makes the following computations and assumptions
A
Metlock, Inc. has identifiable assets with a total fair value of $15,016,000 and liabilities of $8,817,000. The assets include
office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book valun, and land
with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to
those used by Metlock, Inc.
Merinck, Inc's pretax incomes for the years 2022 through 2024 were $1.202.200, $1,500,300, and $950.100 respectively
Carla Vista Homes helieves that an average of these earnings represents a fair estimate of annual earnings for the indefinite
future. However, it may need to consider adjustments to the following items included in pretaceamings
Depreciation on buildings (each year
963100
Depreciation on equipment (each year)
54,500
Extraordinary loss fynar 2024)
301-800
Sales commissions teach year)
251.400
The normal rate of return on net assets for the industry is 15%
Assume further that Carla Vista Homes feels that it must eare a 25 return on its investment and that goodwill is determined by
capitalizing excess eamings. Based on these assumptions, calculate a reasonable offering price for Metlock, Inc. Indicate how
much of the price consists of goodwill. Ignore tax effects. (Round present value factor calculations to 5 decimal places, ea 125124
and final answers to O decimal places ea. 58.971)
Goodwill
Offering price
406
Assume that Carla Vista Homes feels that it must eama 156 return on vestment, but that average excess earnings are to be
So for Metlock, inc indicate how
For these xsumptions
effects (Round present value factor calculations to 5 decimal places, eg 1.25124
and final answers to decimal places es, 58.9713
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