Question: Marta Otis is attempting to sell her business to Hubert
Marta Otis is attempting to sell her business to Hubert Betley. The company has assets of $1,800,000, liabilities of $1,600,000, and stockholders’ equity of $200,000. Both parties agree that the proper rate of return to expect is 12 percent; however, they differ on other assumptions. Otis believes that the business will generate at least $200,000 per year of cash flows for 20 years. Betley thinks that $160,000 in cash flows per year is more reasonable and that only 10 years in the future should be considered. Using Table 2 in Appendix B, determine the range for negotiation by computing the present value of Otis’s offer to sell and of Betley’s offer to buy.
Relevant QuestionsLazur Corporation, whose fiscal year ended June 30, 2011, completed the following transactions involving notes payable:May 21 Obtained a 60-day extension on a $9,000 trade account payable owed to a supplier by signing a ...Hammer Company, whose fiscal year ends December 31, completed the following transactions involving notes payable:2011Nov. 25 Purchased a new loading cart by issuing a 60-day, 10 percent note for $86,400.Dec. 31 Made the ...Both Sun Microsystems Inc. and Cisco Systems are in the computer industry. These data (in millions) are from the end of their fiscal years 2009:Compare the payables turnover and days’ payable for both companies. How are ...Rocco Company has created new apps for mobile phones. Its costs during research and development were $375,000. Its costs after the working program was developed were $264,000. Although the company’s copyright may be ...At the beginning of the fiscal year, Natalie Company purchased for $1,030,000 a patent that applies to the manufacture of a unique tamperproof lid for medicine bottles. Natalie incurred legal costs of $450,000 in ...
Post your question