Present Value of an Annuity of $1 Discount Rate Present Value of $1 Discount Rate Periods 8% 10% 8% 10% 0.6806 0.6209 3.9927 3.7908 0.5835 0.5132 5.2064 4.8684 0.5002 0.4241 6.2469 5.7590 Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $140,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyche's purchase of Trim?

Present Value of an Annuity of $1 Discount Rate Present Value of $1 Discount Rate Periods 8% 10% 8% 10% 0.6806 0.6209 3.9927 3.7908 0.5835 0.5132 5.2064 4.8684 0.5002 0.4241 6.2469 5.7590 Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $140,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyche's purchase of Trim?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 15P: Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes...

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